Tax Collection

IRS Levy Relief

Due to the IRS’s broad administrative powers to collect tax, they have “superior rights” compared to other creditors. The IRS may garnish wages and bank accounts, seize property, acquire government payments and Social Security payments without receiving judicial approval. Garnishments or levies can often be circumvented by keeping in constant contact with the IRS and setting deadlines to provide requested information. Boyle Frost can negotiate with the IRS and help protect your rights while these discussions take place. After a tax assessment is made, the IRS issues a series of notices asking the taxpayer to pay the tax. Taxpayers have 30 days from the date of the Final Notice of Intent to Levy to either pay the tax in full or to request a hearing with the Appeals Office of the IRS.

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An IRS lien is a method for the IRS to secure a form of payment for a tax debt. After liability is determined, the IRS will send a Notice and Demand for Payment. If the taxpayer ignores or forgets to pay the tax debt in full within 10 days after receiving the notice, then the IRS will place a lien on the property. The lien will be the amount of the tax debt that is owed. By filing a lien against your property, creditors will be publically notified that the IRS has a claim against all of your property, including property that obtained in the future. An IRS lien is attached to all of your property and property rights.

An installment agreement is an option for a taxpayer that cannot pay their tax debt in full. IRS collection action is usually prohibited when an installment agreement is in process or is in effect with an exception of a filing of a Notice of Federal Tax Lien. An installment agreement helps shield a taxpayer from bank levies, wage garnishments and the seizing of property. An installment agreement can also be used with state taxing authorities.

For Individual Taxpayers that owe between $25,000 – $50,000, the IRS is relaxing their rules for setting up Installment Agreements. The financial Collection Information Statement, otherwise known as Form 433-A or Form 433-F, will no longer be required for these taxpayers. This will permit the taxpayer to setup streamlined installment agreements. However, this can only be done if the taxpayer agrees to a Direct Debit Installment Agreement. There is a new form, created by the IRS, Form 9465-FS, that will be used for taxpayers that meet the required standards previously mentioned. In addition, the IRS will give taxpayers the option to pay their balance over a 72 month period instead of the traditional 60 month period that is typically offered.

In order to establish an amount for an Installment Agreement, the IRS considers a completed Collection Information Statement and ascertains the taxpayer’s ability to pay. The IRS has both national and local standards for expenses that are listed on these forms. IRS collection staff will attempt to convince taxpayers, who are not familiar with deductions, that their deductions are not allowed. Subsequently, many taxpayers will find the number the IRS is saying they can pay is not within their means. BoyleFrost will make every effort to negotiate a payment arrangement that is not only more reasonable, but much more manageable for you and your family.

As experts in IRS tax issues, our firm can lead you through examining and completing all of the collection information statements including Form 433A and Form 433B, the Form 433F Financial Information Statement and Form 9465 Installment Agreement Request. Taxpayers can use the Online Payment Agreement (OPA) or call the number on the IRS notice if they owe less than $25,000 in taxes, interest and penalties.

There are several solutions for your IRS collections case which may include an Offer in Compromise to satisfy your case with the government. It is recommended you use the expertise of a problem-solving law firm that specializes in personal and corporate tax controversies, and has succeeded in obtaining measurable results for its clients.

An agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed is referred to as an Offer in Compromise. There are three types of Offers in Compromise relating to three separate issues:

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Doubt as to collectability — if a taxpayer cannot pay his or her tax obligation in full, they may qualify for an Offer in Compromise. The IRS will not accept the offer if they believe the obligation can be paid through a payment plan or as a lump sum. In the majority of cases, the IRS will deny a request unless the offer from the taxpayer is equal to or exceeds the Reasonable Collection Potential (RCP). The RCP is a calculation the IRS uses to measure a taxpayer’s ability to pay based on their monthly disposable income, the value of their assets and expected future income.

Doubt as to liability — where the amount the IRS is trying to collect is incorrect, an Offer in Compromise would be relevant. This could be because the tax liability is incorrect, unwarranted penalties were assessed where the taxpayer met the criteria for non-assertion of penalties and if, during an audit, the analyst did not take into account the taxpayer’s evidence, or the taxpayer has new evidence that is relevant.

Effective tax administration — despite the tax obligation being correct, paying the full amount would cause an economic hardship or would be in violation of public policy or inequitable (“Although I am able to pay the full amount, it would destroy our financial stability”).

The IRS is forbidden from taking collection action against the taxpayer once a valid Offer in Compromise is filed. They must wait until after a determination has been made and after the appeal period has ended. Typically there are extensive negotiations between the OIC investigator and the taxpayer or their representative.

The taxpayer has three choices in paying the obligation agreed upon through the Offer in Compromise: a lump sum payable in 5 or less installments, a short term payment plan paid over the course of 24 months from the date the IRS received the letter or a deferred payment plan paid over the remaining period for collecting the tax.

Please contact BoyleFrost for a consultation today to figure out the best course of action for your tax collection issue. We would be happy discuss these options with you.