IRS Problems, IRS Tax Problems

IRS Tax Problems? You Have Choices!

August 23, 2012 - IRS Problems, IRS Tax Problems

  Oh, no. I owe! I owe the IRS.  What do I do now? Is there any hope for me? Will I go to jail? Will I lose my house? Will they take my car? Will they take my retirement account? What can they do to me?   You Have Options Yes, the IRS is very powerful. But you do have some options. You have some choices. If you can pay your taxes in full that is the best solution. But if you cannot pay your taxes in full, the Internal Revenue Service will generally accept payments. After you file your return with taxes due, the IRS will send you a bill for that balance due. AND by law they must charge you interest until the taxes are full paid. AND there may be penalties assessed and added depending on your particular situation. Sort of like “name your price”, you can file a Form 9465 with your return (or after you file your return) to request an installment agreement. You tell the IRS how much you want to pay each month AND which day of the month you want you payment to be due. The IRS has a whole team of people in the Collection Division that will contact you on a regular basis when you owe tax. How long can the IRS Collection Officer come after me? There is a 10-year Statute of Limitations on IRS collection activity. If you are counting the minutes until that time clock stops ticking, you first have to know when that time clock began ticking. If this is you, I encourage you to seek qualified professional tax collection advice.   What Can They Collect? Can the IRS freeze my bank accounts? Can the IRS seize my car? Yes and yes. What is the difference between a lien and a levy? A lien is what is placed on property, whether personal property, like your car, or real property, like your residence or vacation home. A levy is placed on your financial accounts, your bank accounts, your retirement accounts. And the IRS can also garnish your wages to satisfy your tax debt. Now even your employer is involved. The IRS has a formula for determining your ability to pay your balance due. They will evaluate the amount of cash you have on hand and the amount of money you have in the bank. They will look at the value of your real estate and the value of your vehicles and the value of your retirement accounts. The IRS will also look to see if you have the ability to pay. Your ability to pay is based on two things: 1) your net equity in assets and 2) your ability to make monthly payments. The Collection Officer will look at your gross monthly household income. And then the Collection Officer will look at your expenses. The financial reports you must file are very detailed. The Internal Revenue Service can make certain allowances for fairness. There are national standards for personal living expenses based on the size of your family and where in this country you live. There are also allowable expenses for housing, for vehicles, for medical expenses, for income taxes, for court-ordered payments like alimony and child support.  After all of these allowances is there any money left? This is called net disposable monthly income. The IRS will want that disposable income. It is possible that you fall into a category called “currently not collectible?” If this is your situation, the IRS collector will be able to put a hold, or a pause, on their collection efforts. It you have been placed in not collectible status, the collector will review this status periodically.   It’s Not the End of the World It may be serious, but it doesn’t have to be the end of the world. The IRS also has what they call Offer in Compromise. You may be able to compromise your tax bill by offering to make a lump sum payment. There are lots of rules around OIC, but your collection expert representative will help you master this maze. I am a former IRS Tax Auditor. I worked in the Examination Division of the IRS. I left the IRS to open my own tax practice. I prepare tax returns and I represent taxpayers who are being audited. I do not have IRS Collection Division insider knowledge. When my clients owe tax and are unable to make a full payment or pay it off in just a couple of payments, I encourage them to seek the advice of one of my colleagues with Collection Division expertise. Some of them are former collectors, who also left the IRS and are now on your side on the outside. Some have developed their skills based on their dealings with the IRS. Either way, you need some one who knows the rules of IRS collection so you can play that game to win, too.   Always to your lowest legal tax,   Nellie Williams. EA Bullet Proof Your Taxes