- Contact from IRS
- IRS Powers
- Unfiled Returns
- Options to Reduce or Erase the Debt
- IRS Requests for Your Information
- Communication with the IRS
- Lost Documents
PREP STEPS FOR IRS COLLECTIONS:
- Gather your tax returns, if you have them.
- Collect any IRS notices you have.
- Obtain any Bankruptcy or Divorce papers you have in the last 3 years.
- If you have a levy, get the fax number for your Bank or Payroll at your job, whichever it is.
- Call the IRS at 1-800-829-1040 & request your "Account Transcripts" & your "Wage & Income Transcripts"* for the last 10 years. (More)
- Contact Mr. Hopkins in Colorado Springs, Pueblo or Denver to set a consultation.
- Bring all above documents to the consultation. See you there!
If you are self-employed please also complete IRS Form 433B.
For Tax Attorney tips in to complete these vital forms please watch the TaxHelp Webinars for guidance!
Contact from IRS
Most of the letters you receive from the IRS will come from the various Automated Collection Service (ACS) Centers around the USA. However, IRS collections might send a local Revenue Officer to visit you in your house or business. They will want to ask you questions & request documents from you by giving you a Form 9297.
Private Collection Agencies
The IRS has recently been using private collection agencies, similar to Colorado, as evident from Notice CP40 they are sending taxpayers along with Publication 4518. Whether this will be effective remains to be seen.
The IRS might issue a Summons to you or your bank. They can't arrest you or enforce the Summons but if you don't respond adequately they can (rarely) request the Department of Justice to file Contempt of Court charges against you in US District Court.
The powers of the IRS to take your money and property are vast and taxpayers often have no idea a seizure is coming. The IRS is required to give notification before seizing but this notice is often lost or mis-mailed. The Notice of Intent to Levy is the final notice you will receive before the IRS has the right to take your assets, wages, bank accounts, etc. After 30 days they can seize practically anything. What they seize most often is Wages, Bank Accounts & Refunds.
IRS collections can also file a Notice of Federal Tax Lien against you. This is not a seizure of your property but can encumber your ability to sell the property.
But, if you do overpay them, they will refund your money. (See Letter 707C)
The IRS is notorious for taking refunds to pay for support, student loans or old IRS or State taxes. Usually, seizures for student loans and support are not recoverable. But taxes may be recovered through a claim for refund, depending on the circumstances. IRS Tax Collection Lawyer Mr. Hopkins will show you how!
Levy or Garnishment
After 30 days from the mailing of the Notice of Intent to Levy the IRS can seize most of your property. The IRS will send no further notices and they will not tell you when they are going to levy.
A wage levy is the worst because it is continuous and the IRS often takes over 90% of your wages. (See Pub. 1494.) The only way to stop it is to get an installment agreement & a release with the IRS, file a Collection Due Process appeal (See IRS Appeals, below), or file bankruptcy.
A bank levy is hard because the IRS will take all the money in the account, up to the amount of tax due. However, the bank holds the money in escrow for 21 days before they send it to the IRS. So, within this 21 day time period, the IRS tax debt attorney, Mr. Hopkins will try to secure a release. Bank levies are not continuous so only the amount in the bank on the day of the levy is taken.
If you are a Federal Contractor the IRS can levy without giving you a hearing. (See Notice LT75)
If you are an employer the IRS may send you Notice LP68 stating you no longer need to hold the taxpayers wages or property.
IRS Tax Liens
A lien against all your property exists simply because you owe the USA. Whether IRS collections will file a notice of this lien is discretionary. The IRS has administrative rules about lien filings but if they fail to follow the rules, a judge won't usually interfere.
A Tax lien is a claim of a secured interest against property the debtor owns so if the property is sold the IRS gets the proceeds. A Levy is the IRS action of taking your property. A garnishment is when Colorado takes your property.
Warning about Tax Liens and "Representatives"
This tax lien is filed publicly so everyone can see it. Therefore, immediately after the lien is filed you will receive a flood of telephone calls & letters from "representatives" who claim (& guarantee) that they can eliminate this tax problem. Many of these letters look "official" with grave warnings for failure to contact them. They offer "free consultations" where they prey upon your fears & hopes in order to sell you a very expensive, futile "service". They will steal your money (which could go to the IRS) and harm you by extending the statute of limitations. Of course, they are not lawyers & have no ethical duty to tell you the truth. (See Blog Articles)
Lien on Real Estate
When you own property with equity subject to an IRS lien you can still apply for a loan to pay off the IRS. This requires some special planning so don't do anything before seeking legal advice. Nevertheless, in most instances you'll have to submit an Application for Certificate of Subordination of Federal Tax Lien (Form 14134) to qualify for any loan you seek.
If you own real estate which is subject to a lien and the limitations period for collection has expired, you don't need to seek a Certificate of Release of Federal Tax Lien because the lien "self-releases" itself after the expiration of the statute of limitations. (Form 668yc)
When a lien has been filed, you still can purchase real estate and your lender will have a superior priority over the IRS collections lien so you can purchase the property. See Pub. 785
For purchased real estate which has a lien on it the BUYER will have to make an Application for Certificate of Discharge of Property from Federal Tax Lien (Form 14135) to erase the lien from the real estate.
You can also view the IRS video on "IRS Liens".
The only ways to get the IRS to release a validly filed lien are to pay the debt, to pay an accepted Offer in Compromise, if the statute of limitations expires, or if the release is in conjunction with a property sale.
Once the IRS places a line upon you it will not be released until you pay ALL amounts you owe the IRS even those debts not appearing on the lien.
If the reason for the lien release is because of the expiration of the statute of limitations, then there is no need to apply for a Certificate of Release of Federal Tax Lien. The "release" appears on the face of the original lien itself. You can use this language to prove no tax lien exists against you.
Certificate of Release
Sometimes taxpayers cannot get a loan or they have a security clearance problem or some reason they need to get the IRS to "certify" that there is no lien against them. You can call the IRS Transcript service and get a Certificate of non-filing. But if necessary, there is a form and a procedure to secure a Certificate of Release of Federal Tax Lien. (See Pub. 1450)
The IRS has a new lien withdrawal initiative where, if you can pay the debt off in 60 months, it is less the $25,000, you are current on taxes, and you have at least 3 direct debits out of your bank account or wages for tax payments, you can apply to have the lien notice withdrawn (See Form 10916). This does not eliminate the debt, it is just a withdrawal of the lien so you can get a loan or pay the tax otherwise. See Form 12277, the IRS video & call our offices for detail!
Certificate of Non-Attachment
Sometime, taxpayers get confused with other taxpayers on credit reports and are unfairly denied credit. So, if a taxpayer sees that a Federal Tax Lien from another taxpayer shows up in his or her history, they can request a Certificate of Non-attachment of Federal Tax Lien. There is no particular form for making this request but the IRS does print Publication 1024, which gives some guidance.
The IRS also publishes a webpage devoted to information about Federal Tax liens.
But, the IRS won't agree to installment payments if you have unfiled returns. So, if you want to stop the levy, the returns must be filed and the financial information disclosed. Then, we must negotiate.
However, because of statute of limitation issues, it is best to follow the Unfiled Returns Prep Steps & contact TaxHelpLaw for an appointment before preparing or filing the returns. Filing the returns immediately may hurt you!
Options to Reduce or Erase the Debt
The various tools to reduce your IRS debt include Adjusting the Tax, Penalty Abatement, an Offer in Compromise, a Payment Plan, or Bankruptcy. With any of these remedies, there are positive and negative implications for your individual situation.
You must weigh each of these implications before carefully deciding what approach to take. Some remedies negate other remedies and worsen your position. Plus, there are non-tax implications to what you choose to do as well.
Do not be fooled by representatives who promise or guarantee a favorable result with the IRS. Only a tax attorney can go to Court and pursue all your remedies.
Adjusting the Tax
Surprisingly, this often over-looked process is very effective & inexpensive. Many times, through miscalculation, mischaracterization, or oversight, taxpayers do not owe the amount of tax alleged by the IRS. With original or amended filings (Form 1040X)your debt can be adjusted down. But, the debt may not be fully erased and new filings start new IRS limitation periods for all purposes.
Abatement Requests should be regularly used because they do not increase the statute of limitations. However, they only reduce the debt, not eliminate it.
Offers in Compromise
Offers should be sparingly used because they increase the statute of limitations and because of the likelihood of rejection after you've disclosed all your financial information to IRS collections and waited for at least a year. But, when used appropriately, Offers dissolve the debt and the tax lien. We only make offers if we feel they will be successful.
The only way an offer is going to be successful is if ALL the proper research is done beforehand and all the financial calculations are thoroughly reviewed with various scenarios explored to ensure the highest possible chance of success. But, even then, it is likely you'll be rejected and have resolve your case with an Appeal.
Many people who file Offers in Compromise wish they would have simply filed for Bankruptcy.
Please read and contribute to the Taxpayer Advocate Blog entitled, "Offers in Compromise".
Installment Agreements must usually be arranged to stop any levies and get time to gather the evidence & review your situation to determine the best option for your individual, long-term strategy.
Once you get a bill from IRS collections you can submit Form 9465 and request an installment agreement. But, don't be surprised if the IRS sends you Letter 484C or Notice LT27 demanding that you supply your financial information with Form 433F or Form 433A for individuals or Form 433B for Businesses. The IRS will not help you without these forms & they offer little help to comply.
So, we have designed Webinars to teach you the tactics, requirements & strategies when completing these vital forms. Then, you will be prepared against the IRS, even if you hire us to represent you. IRS Tax Collection Lawyer Mr Hopkins specializes in designing creative methods to pay the debt and give you favorable tax implications for your future!
If you prove with the Form 433F you submit to the IRS that you can't pay, they will place your account in "temporarily uncollectible" & not enforce collection against you immediately. See also, Letter 4624C. But, the debt is not eliminated, just postponed. The IRS will probably place a lien against you & they will periodically send you "reminder" letters of the debt.
To prove a hardship case you need to have solid proof of all the billings & payments for your personal living expenses. Any extraordinary costs must be detailed, itemized & calculated for the IRS with supporting evidence of the necessity for the expense. If the expense is medical, get the doctor's report highlighting the infirmity, the duration & the prognosis. If the expense is some disaster, such as a fire, get the fire department report, the insurance report & any appraisals or estimates of the nature & effects of the disaster.
Remember to keep all billings & receipts to see if any are deductible on next year's tax return.
Please read and contribute to the TaxHelp Blog, "Uncollectible Status and the IRS".
The benefit of bankruptcy is that a Court enforces its order against the IRS. With an Offer in Compromise, you're essentially begging the IRS to take less. With bankruptcy, the Court forces the IRS to leave you alone.
But, there are certain qualifications and limits to filing bankruptcy. It is mandatory that all tax returns be filed prior to filing bankruptcy. At a minimum, the income taxes to be discharged must have been filed more than 2 years before the bankruptcy filing date and the tax year is at least 3 years old. With Chapter 7, the lien will not be released until the statute of limitations expires but the debt cannot be collected.
For Chapter 13 bankruptcy, the amount of "priority" & "secured" tax debt must be paid over 5 years. But, if you successfully complete the plan the IRS must release any corresponding liens against you.
The IRS can continue to collect for years not covered by the bankruptcy but they may place you in "temporarily uncollectible status".
Anyone who is considering an Offer in Compromise should review the bankruptcy options as well. Call Robert Bradley, JD for a FREE, confidential, bankruptcy attorney conference. TaxHelpLaw gives you the option of pursuing all your remedies!
Please read and contribute to the TaxHelp Blog "Bankruptcy and the IRS".
There are various types of Appeals available within the IRS for Collections. The most popular one is the Collection Due Process Appeal. This is useful if the IRS will not agree to an installment agreement and insist on a levy.
However, an Appeal will only be possible if you have complied with all legal requirements. Otherwise, Appeals will reject the case. Plus, you only have one chance to succeed with a Collection Due Process hearing. If you are unsuccessful the IRS won't grant you another hearing. (See Notice LT73, for businesses)
And, you extend the statute of limitations if you Appeal, which could harm you in the long run.
Also, although the IRS invites you to Appeal a tax lien placed on you, they have no power to reverse a validly filed lien. So, if you can't contest the lien, don't waste your time and extend the statute of limitations. If you decide to Appeal, please follow the TaxHelpLaw Prep Steps for Appeals.
Often, a taxpayer claims to be an innocent spouse to seek relief from joint liability with an ex-spouse. Please note the questions in Form 8857. There are tax and non-tax implications of requesting innocent spouse relief. This action is not always wise and the manner & language of the request must be carefully considered. Since you only have one chance to obtain this relief, please follow the Prep Steps for Appeals & contact TaxHelpLaw for success!
IRS Requests for Your Information
Please DO NOT complete any questionnaires or financial documents for IRS collections officers until you've met with the attorney for IRS debt, Mr. Hopkins. What you say in writing WILL be used against you!
Communication with the IRS
The primary method of contact from IRS collections remains through the US Postal Service. If your case is more serious the IRS may assign a local Revenue Officer who may come by your house or business. But, they will always send you mail. They can communicate by telephone and fax but not by E-mail. When you write the IRS, do not expect a rapid response.
Mailing Order of IRS Notices
Many people are curious about the IRS pattern of mailing notices. What letter will I receive next? The IRS has several different forms that say the same thing and they are not necessarily compelled to send them in any set order, although they can't seize your assets without sending a Notice of Intent to Levy.
It is often difficult to predict which notice they will send or in what order. Generally, they initially send passive letters of the debt and then each successive letter becomes increasingly hostile until they levy.
But, after the IRS has exhausted their first collection attempts, they'll periodically send you reminder notices and then the pattern of increasingly hostile letters begins again. They want to remain unpredictable, just like any debt collector.
IRS Mailing Address
The address to send your responses to IRS collections is the address on the letter or notice to which you are responding. There are several different Service Centers throughout the U.S. so you must respond to the proper Center in your area. Call the IRS at 1-800-829-1040 if you are unsure.
You may fear contact with IRS collections because you didn't keep your records or your records are lost or unavailable. However, unless you only used cash, bank records & credit card records can be re-created. Also, even if cash was used, affidavits can be obtained or we can use industry standards to arrive at a reasonable figure. See Lost Documents.
We give our clients long-term protection from the IRS throughout the collection limitation period and we do not rashly make Offers in Compromise unless there is a good chance of success. We look at ALL the options!
Your strategy against IRS Collections will depend on the type of tax involved as well the years, the amount at issue and your current lifestyle. By reviewing all these factors TaxHelpLaw can create an Action Plan for you.
*Wage & Income transcripts are computer-generated IRS records about you from your job, your bank, your mortgage company, etc. Account Transcripts show details of your account at the IRS. If you are too nervous about calling IRS collections just bring what you can and come in. If you call, the IRS may be stern but don't worry, you need the Wage & Income Transcripts and the Account Transcripts. Tell them you are not yet ready to talk and need the documents to get tax legal advice. Don't Argue!!