Employment Taxes Amid COVID – Part 2

 Part 1 discussed the deferral of employment tax deposits and payments for the year 2020 (Deferral of employment tax deposits and payments through December 31, 2020 | Internal Revenue Service (irs.gov)). The Coronavirus, Aid, Relief and Economic Security Act (CARES Act) allows the employer to defer the employer’s share of the social security tax for the first quarter of 2020. What would have been the full amount of the employment tax liability due for that quarter, including the liability for which deposits would have been due on or after March 27, 2020, did not have to be paid. However, this presents a bookkeeping problem. There is now a discrepancy for the first quarter between the amount of the liability reported and the amount of deposits and payments for that liability. The Internal Revenue Service (IRS) will send a notice to these employers identifying the difference as an unresolved amount. This notice will also include additional information instructing the employer how to inform the IRS that it had deferred payment or deposit of the employer’s portion of the social security tax due after March 27, 2020, for the first quarter of that year under section 2302 of the CARES Act.

This deferral applies to all businesses including those that deposit employment taxes annually. As long as the deposit amount relates to the tax imposed on wages paid on or after December 31, 2020, during the payroll tax deferral period, then the employer may defer this amount. If an employer had already deposited the amount with the IRS for employment taxes, he or she may receive a refund of Social Security tax already deposited. This is a result of paying the amount due but then receiving tax credits, such as the Research Payroll Tax Credit, the Families First Coronavirus Response Act (FFCRA) paid leave credits, and the employee retention credit (Employer Tax Credits | Internal Revenue Service (irs.gov)). Since this can be complicated in reporting, it is best to consult a tax professional for help with payroll taxes. 

Another situation that may require help with employment taxes is the forgiving of a loan that an employer received from the Small Business Administration for payroll. The Paycheck Protection Program (PPP) provide monies for wages for employees so that the employer could afford to keep employees rather than laying them off. At first, these payroll taxes could not be deferred; however, the CARES Act was amended so that employers could defer the payment and deposit of the employer’s share of Social Security tax after the employer received notice that the PPP loan was forgiven by the lender. 

In anticipation of the FFCRA paid leave credits and employee retention credits, an employer was permitted to defer payment of employee taxes, including taxes withheld from employees. However, employers who reduced the amount of their deposits in excess of the deferral, the allowable FFCRA paid leave credits and the employee retention credits may be liable for a failure to deposit penalty for the excess reduction. This may trigger a Trust Fund Recovery Penalty (TFRP). Since this is a serious matter, it is best to have a tax professional handle it. Call Bullseye Tax Relief now before the matter gets worse!

Employment Taxes Amid COVID – Part 1

 It is not necessary to say that this past year has been a particularly trying one. COVID has upended the entire world, especially the business one. Businesses long established as the foundation of the American economy have found themselves to being greatly diminished or have disappeared forever, such as Sears, Fry’s Electronics, and Soup!antation eatery. Likewise, many other small businesses have been forced to permanently close. The Federal and State governments tried to help with tax credits, but sometimes even that did not help. So now the focus is trying to get back to “normal” or to a new version of “normal”. 

COVID changed the way we do business, but like the saying goes: there is no escaping death and taxes. Both Federal and State Taxes (and local taxes) are still due, but perhaps in a diminished form. Congress passed the Coronavirus, Aid, Relief and Economic Security Act (CARES Act) to help with the economic havoc wrought by COVID (Deferral of employment tax deposits and payments through December 31, 2020 | Internal Revenue Service (irs.gov)). With the help of this Act, businesses were able to continue to pay their employees and stay in business. However, this Act also brought a different set of accounting for payroll taxes with it. A tax professional, such as the ones at Bullseye Tax Relief, can help you navigate these uncharted waters.

Normally, businesses deposit employment taxes with the Internal Revenue Service (IRS) quarterly. These employment taxes include federal income tax, social security and Medicare tax, unemployment tax (FUTA) and self-employment tax (SE), if applicable. The CARES Act allowed businesses to defer the deposit and payment of the employer’s portion of the Social Security Taxes. There will be no penalties for not depositing these taxes with the IRS on time. However, this grace period does not last forever. The “payroll tax deferral period” began on March 27, 2020, and ends December 31, 2020. After that time frame, employers must collect and deposit those taxes with the IRS as they had prior to COVID.

Since the payments and the deposits are deferred until the end of December 2020, this applies to the monies collected that relate to the last quarter of 2020. These monies do not have to be deposited with the IRS at this time. Furthermore, employers may also be entitled to tax credits (Employer Tax Credits | Internal Revenue Service (irs.gov)) that can offset these deposit amounts. Refundable tax credits include credits for paid leave under the Families First Coronavirus Response Act (FFCRA) or for qualified wages under the employee retention credit. In addition to the deferral, these credits can reduce the employer’s deposits required for the IRS. Employers DO NOT make a special election to defer payments and deposits of these employment taxes. They should report the deferred taxes on the appropriate line on their employment tax return. Employers needing help with employment taxes should consult a tax professional so that they receive the maximum amount of credit possible.

Employers should also ask for help with payroll taxes since they have been complicated with COVID this past year. Unfortunately, IRS Form 941 (Employer’s Quarterly Federal Tax Return) was not revised until the second quarter of the year. It does not reflect the deferred deposits otherwise due on or after March 27, 2020, for that quarter or the deferred wages paid between March 27, 2020, to March 31, 2020. However, the form has been revised to reflect the employer’s deferral of the employer’s share of the Social Security tax for the second, third and fourth quarters. 

As you can see, COVID has complicated the tax process. Your best option is to seek business tax help to avoid any mistakes that may negatively affect your payment of employment taxes. Call us today!

Business Taxes are Dependent upon Business Structure – Part 3

 We will discuss the last two of the five business structures recognized by the Internal Revenue Service (IRS) (Business Structures | Internal Revenue Service (irs.gov)) in this blog. Corporations (Forming a Corporation | Internal Revenue Service (irs.gov)) and S-Corporations (S Corporations | Internal Revenue Service (irs.gov)) involve shareholders rather than owners that the first three business structures have. 

Corporations

Prospective shareholders exchange money, property, or both for the corporation’s capital stock. Usually, a corporation takes the same deductions that a sole proprietorship takes in calculating its taxable income. A corporation can also take special deductions. A C corporation is recognized by the Internal Revenue Service (IRS) as a separate taxpaying entity for federal income tax purposes. Corporations can conduct business, pay taxes, realize net income or loss, and distribute profits to its shareholders. These calculations can be very complicated so it is best to consult a tax professional for help with employment tax.

Profits of corporations are taxed once to the corporation when earned and once to the shareholders when distributed as dividends. This creates a double tax on the profits. Corporations cannot deduct any taxes when it distributes dividends to its shareholders and shareholders cannot deduct any losses incurred by the corporation. 

Corporations are liable for income tax, estimated tax, employment taxes (federal income tax withholding, social security and Medicare tax, and federal unemployment tax) and excise taxes. There are many different forms to use to report and file these taxes, making the process complicated. It is best to have help with payroll tax from a tax professional than attempting to calculate and report these taxes on your own. 

S Corporations

For federal tax purposes, S corporations elect to pass income, deductions, losses, and credits through to their shareholders. Similar to partnerships, shareholders of S corporations report the “flow-through” of income and losses on their own personal income tax returns. They are then assessed tax at their individual income tax rates. This means that shareholders can pay different amount of taxes on their income depending upon their tax bracket. By allowing for the “flow-through” of income and losses, S corporations avoid the double taxation on the corporate income. However, S corporations are responsible for taxes on certain built-in gains and passive income at the entry level. 

A corporation must meet the following requirements to qualify for S corporation status:

• Be a domestic corporation
• Have no more than 100 shareholders
• Have only one class of stock
• Have only allowable shareholders: a) individuals, certain trusts, and estates and b) not be partnerships, other corporations, or non-resident alien shareholders
• Not be an ineligible corporation, such as certain insurance companies, financial institutions, and domestic international sales corporations

Additionally, the corporation must submit IRS Form 2553 (Election by a Small Business Corporation) signed by all shareholders. 

The American Rescue Plan 

The American Rescue Plan (ARP) Act of 2021 allows small and mid-sized employers as well as certain governmental employers to claim refundable tax credits, reimbursing them for the cost of providing paid sick and family leave to employees due to COVID-19. This includes time given to employees to receive and recover from COVID-19 vaccinations. 

The IRS recognizes that COVID has placed a burden on all businesses and individuals. Before closing a business, it is best to consult a tax professional. The IRS has tax credits and COVID relief resources for those affected by the virus. Contact Bullseye Tax Relief today!

Business Taxes are Dependent upon Business Structure – Part 2

 As discussed in an earlier blog, there are five business structures recognized by the Internal Revenue Service (IRS) (Business Structures | Internal Revenue Service (irs.gov)). Partnerships and Limited Liability Companies have been previously discussed. Sole Proprietorships (Sole Proprietorships | Internal Revenue Service (irs.gov)) will be discussed in this blog.

A sole proprietor is an individual who owns a business. A sole proprietor reports his or her income on individual income tax returns, such as IRS Form 1040. The individual reports profits and losses from this business on IRS Form Schedule C. Schedule SE for reporting self-employment may also be used. 

The federal income tax is a “pay-as-you-go” tax. As you receive or earn income, you pay the appropriate income tax throughout the year. Employees have taxes withheld from each paycheck. Individuals may have to pay estimated taxes if they do not have income tax withheld or if they do not have enough income taxes withheld. Self-employment tax (SE tax) is paid by individuals who work for themselves. These payments contribute to their coverage under the social security system, which pays their social security and Medicare. Social security coverage provides the individual with retirement benefits, survivor benefits, disability benefits, and hospital insurance benefits or Medicare. Since this process can be complex and complicated, it is best to seek help with payroll tax from a tax professional. 

There are two criteria for paying SE tax and filing the required Schedule SE (IRS Form 1040 or 1040-R):

• If net earnings for self-employment was $400 or more
• If wages of $108.28 or more are received while working for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes

Please note that there are special rules or exemptions for fishing crew members, aliens, notary public, state or local government employees, foreign government or international organization employees, among others. If you qualify for any of these exemptions, seek consultation with a tax professional for help with employment tax.

If you have employees, no matter what business structure, you are required to pay certain taxes and file certain forms. Employment taxes include:

• Federal income tax withholding
• Social security and Medicare taxes
• Federal unemployment tax (FUTA)

As a business, you must deposit federal income tax withheld from your employees to the Internal Revenue Service (IRS) before the deadline. You must also deposit with the IRS both portions of the employer and employee social security and Medicare taxes collected for that timeframe. This must also be deposited on time. Finally, all taxes deposited, wages, tips, and any other compensations paid to an employee(s), must also be reported to the IRS. Businesses as well as self-employed taxpayers can use electronic filing options for many of the forms and taxes small businesses are required to file, including employment taxes and information returns. A federal tax identification number or Employer Identification Number (EIN) is used to identify tax reports to the IRS.

Collecting, filing and depositing employment taxes can be very complicated. An error can be very costly to fix. Why not hire a tax professional to process these tasks so that you can focus on growing your business? We at Bullseye Tax Relief are here to help. Our next blog will focus on corporations.

Business Taxes are Dependent upon Business Structure – Part I

 All businesses must pay taxes. However, not all business taxes are the same for every business. The type, amount and form used in paying taxes is dependent upon the type of business entity. When someone starts a business, he or she must decide what business structure the business is to have. There are five business structures (Business Structures | Internal Revenue Service (irs.gov)), each with advantages and disadvantages. They are:

• Partnerships (Partnerships | Internal Revenue Service (irs.gov))
• Limited Liability Company (LLC) (Limited Liability Company (LLC) | Internal Revenue Service (irs.gov))
• Sole Proprietorships (Sole Proprietorships | Internal Revenue Service (irs.gov))
• Corporations (Forming a Corporation | Internal Revenue Service (irs.gov))
• S Corporations (S Corporations | Internal Revenue Service (irs.gov))

Partnerships

A Partnership is formed when two or more people join together to do a trade or business. Each partner contributes money, skill, labor or property to the partnership. Each partner shares in the profit or loss of that partnership. The unusual feature of a partnership is that the partnership itself does not pay income taxes. All other business structures do. Instead, a partnership must file an information return to report any income, deductions, gains, losses, etc. from the operation of that partnership. Profits and losses are “passed through” to the partners themselves. Each partner reports their share of profits or losses of the partnership on their own personal income tax return, hence the term “pass through”. Since partners are not employees, they do not receive a W-2 form indicating their income. Instead, the partnership furnishes a copy of Schedule K-1 (IRS Form 1065).

A partnership is a complex business structure. Mistakes in reporting income can be costly. Partnerships do not afford protections of personal assets and properties that other business structures provide. Therefore, it is important to hire a knowledgeable tax professional that can help navigate through the legal and tax features of the business. Remember, if you need help with payroll tax, it is best to consult a tax professional at Bullseye Tax Relief. 

Limited Liability Company (LLC)

Since a Limited Liability Company (LLC) is allowed by each state, it is best to check with your state for its regulations for this business structure since regulations differ for each state. Owners of LLC are called members. Since most states do not restrict ownership, owners can be individuals, other LLCs, corporations or even foreign entities. Most states permit “single-member” LLCs whereby there is only one owner; however, there is no maximum number for membership. Depending upon the number of members and the elections of that LLC, the Internal Revenue Service (IRS) will treat the LLC as a corporation, filing IRS Form 8832 or as a “disregarded entity”. 

Remember that any tax mistakes may be assigned to the business owner. For instance, if the business does not pay the correct tax amount, the IRS can place a lien, levy or seizure action against the owner of the business for these unpaid taxes. The IRS may assess a Trust Fund Recovery Penalty (TFRP) against the owner of a business that has not paid its tax obligation. To avoid this hassle, individuals should consult a tax professional, such as those at Bullseye Tax Relief for assistance. Our next blog will discuss sole proprietorships and employment taxes, including self-employment taxes.

An Administrative Appeal Allows for a Second Chance

 As stated in earlier blogs, the Internal Revenue Service (IRS) is not perfect. They can, and do, make mistakes. They can miscalculate tax amounts owed or even overlook deductions. Fortunately, for taxpayers there is a process that can reverse or stop an IRS’ decision or action that is unfair or incorrect. An Administrative appeal gives you a second chance that may lead to a more favorable outcome with your tax problem. Help is available without going to court.

An Administrative Appeal process can apply to any appeal filed regarding a decision and/or action taken by the IRS. This can include decisions made during audits or for collecting a tax debt. The IRS allows any taxpayer who feels that the IRS was unfair or incorrect regarding a tax situation, to appeal without legal action through their Office of Appeals. This entity is separate from the IRS themselves so that decisions are objective.

Since all Administrative Appeals are filed through the IRS Office of Appeals, the process is often more cost effective than going to court. You have a right to appeal disputes with the IRS or even tax audits. Sometimes the IRS will request either written arbitration or a hearing usually over the phone with an official within the IRS Office of Appeals once a taxpayer has filed an appeal. This arbitration or hearing will determine a final decision, although arbitration is optional. Most appeals should be made through a tax professional for the best outcome. However, if your appeal is rejected, you may appeal the rejection of that appeal as well.

The IRS will halt any collection actions against you until the appeal is resolved and a decision is made whenever an Administrative Appeal is filed. The timing for filing an Administrative Appeal depends upon the type being filed; however, the following criteria is best when filing any appeal:

• File an appeal as soon as possible.
• Immediately file an appeal after the IRS makes a decision you disagree with.
• When being audited by the IRS, file an appeal as soon as possible so that no actions are taken by the IRS before you can appeal.

Although there are many situations in which you can file an Administrative Appeal, the following is a list of the more common reasons:

• Decisions made during a tax audit
• Undesirable response or rejection when applying for an Offer in Compromise
• Notice and/or placement of any liens, levies, or seizures of property
• Modification, rejection, termination, or any change to an Installment Agreement
• Any collection decision and/or action made by the IRS
• Rejection of an appeal

The most common type of appeals are the Collection Due Process (CDP) and the Collection Appeal Program (CAP). However, there are other types of appeals that can better suit your situation. The most important takeaway from this blog is to consult a tax professional to guide you through your best options and processes whenever the IRS takes any action against you for which you wish to appeal. Administrative Appeals are difficult, complex, and may not always produce the best-case scenario outcome. A tax professional can provide you with the best- and worst-case scenarios to help you find the best option for relieving you of any outstanding tax debt. Call us today for tax resolutions!

Challenging an IRS Collection Action

 Is the Internal Revenue Service (IRS) always correct when assessing taxpayers’ tax returns? Of course not. Since IRS agents are human, they can make incorrect decisions or mathematical mistakes. How do you reverse their mistakes? A Collection Appeal allows taxpayers to challenge IRS’s actions regarding the collection of past taxes which may include the placement of liens and/or levies against taxpayer’ properties for the purpose of collecting said taxes. This challenge will stop or reverse any collection process and relieves the taxpayer of any collection actions in many cases.

Once you fall behind on your tax obligations, the IRS will begin the collection process on any outstanding balances. The IRS is permitted to place liens and levies on properties and assets to ensure the collection of taxes owed. The collection process begins with collection notices from the IRS outlining their intent to collect. Like any other entity, the IRS can be wrong in assessing taxes, penalties, interest or even that you owe money in the first place. Luckily, any wrongful actions can be reversed. 

The IRS recognizes two types of collection appeals: Collection Due Process (CDP) and the Collection Appeal Program (CAP). Both options apply to specific circumstances. Sometimes these circumstances may overlap so consulting a tax professional is very important when choosing an option. 

The Collection Due Process allows the taxpayer to appeal a Notice of Federal Tax Lien, before and after a levy has been placed on a property, depending upon the type of levy. A CDP may stop or reverse the collection process. According to the IRS, you would use the Collection Due Process to appeal when you have received one of the following notices or are in one of the following situations:

• Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320
• Notice of Jeopardy Levy and Right of Appeal
• Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing
• Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
• The collection is found to be a mistake
• Any collection that may cause financial hardship

You must file an appeal of the IRS’ ruling and/or actions within 30 days of the receipt of the first notice of a right to a hearing to be eligible for Collection Due Process. All collections actions by the IRS are stopped until a final decision is made. Filing a CDP after the 30-day window is permissible but it does not stop the IRS from taking collection actions against you.

The second option, the Collection Appeal Program, is used in the following circumstances:

• Before or after the IRS has placed a lien, levy, or any other seizure action on your property for the collection of past taxes
• The rejection or termination of an Installment Agreement

But not in the following situations:

• Trust Fund Recovery Penalty
• Jeopardy levies
• Issues not within the scope of the IRS
• Offer in Compromise
• Actions taken by a Court
• Collection decisions that do not allow for the release of a lien

Being more lenient, CAP allows you to file an appeal before or after an action is taken by the IRS, although it is best to take immediate action. Filing for CAP before the IRS starts any collection action usually protects you from any collection action unless the IRS feels that the collection of the tax debt is at risk.

It is best to consult a tax professional if you believe that the IRS may place a collection action against your properties. A knowledgeable tax professional can explore all your options and determine what course of action will produce the best outcome for you. As always, we at Bullseye Tax Relief are here for you to help with any tax resolution issues. Call us today!

Why Is a Statute of Limitations Important?

 Just what exactly is a Statute of Limitations? Why is it important to me? These two questions are answered in this blog. The Statute of Limitations can determine whether the Internal Revenue Service (IRS) can claim any taxes, penalties, and interest against you for past tax debts. The Statute of Limitations is the time frame mandated by law for the IRS to review, assess and/or resolve any tax related issue against you. Once this time passes, the IRS forfeits any claim for taxes, interest, penalties, and collection actions. On the flip side, the taxpayer forfeits any claim to past refunds if the Statute of Limitations expires.

There are three types of Statutes of Limitations:

• Refund Statute – Your claim for a refund must be done within three years of the filed tax return. The time period is from the date the tax return was due or two years after you paid the tax.
• Assessment Statute – The IRS must assess or audit your tax return within three years of the date for which the tax return was due or two years from when you paid the tax. The IRS cannot audit or charge you additional taxes after this time frame.
• Collection Statute – The IRS has 10 years from the date in which they assessed a tax against you to collect on that tax debt.

Be aware that the Statute of Limitations does not apply in cases whereby an individual files a fraudulent tax return, does not file a tax return for a year for which you should have filed, or attempts to evade paying taxes. In such cases, it is best to resolve these issues so that the Statute of Limitations may apply.

In what situations does the Statute of Limitations help? One example pertains to the collection statute of limitations. If you receive an Offer in Compromise (OIC) for a tax debt, you may not be required to pay off your entire tax debt if the 10-year Statute of Limitations expires before you pay off the tax debt. The remaining amount of the tax debt is legally required to be forgiven. However, filing for an Offer in Compromise extends the Statute of Limitations to 10 years from the date that the OIC was filed, not from the time the tax return was filed. Likewise, this scenario can apply to Installment Agreements. It is possible that the Statute of Limitations expires before paying the entire amount. Remember that the time frame restarts to the time when the Installment Agreement was filed. In essence, the clock is restarted to the time when you file or were approved for a tax resolution option.

The Statute of Limitations can work to your benefit when reviewing past tax returns. A tax professional can find a refund that you previously missed. It can also help you in resolving past tax debts in that a portion of the tax debt can be forgiven. It is best to consult with a tax professional for any tax problems help. Contact us today!

What is Innocent Spouse Relief?

 Sometimes an individual underreports his or her income to the Internal Revenue Service (IRS). Whenever the IRS discovers that this has occurred, it will investigate all parties involved, including spouses if the two have filed a joint tax return. If a spouse can prove to the IRS that he or she did not deliberately act in the underreporting of income, that individual may apply for Innocent Spouse Relief. 

Innocent Spouse Relief relieves that individual from paying any taxes, penalties and interest on misreported or underreport items on the tax return for which his or her spouse is ultimately responsible for. It applies if your spouse or former spouse omitted or improperly reported items on the joint tax return without your knowledge. The IRS will determine whether you will be relieved of the responsibility for all or a portion of the amount after they approve your request for relief. You must file the form for Innocent Spouse Relief (IRS Form 8857). Per the IRS, Innocent Spouse Relief only applies to individual or self-employment taxes. It does not apply to business taxes, household employment taxes, individual shared responsibility payments or trust fund recovery penalty employment taxes.

There are a number of conditions for qualifying for Innocent Spouse Relief:

• You filed a joint tax return with an understatement of tax due to unreported income or incorrect credit(s), deduction(s) or basis(es).
• At the time of signing the joint tax return, you did not know, and had no reason to know, that there was an understatement of income.
• It would be unfair to hold you liable for the understatement of income and tax due to facts and circumstances.
• Neither you nor your spouse (or former spouse) have transferred property to one another as part of a fraudulent scheme, defrauding the IRS or another third party, such as a creditor, ex-spouse or business partner.

There are several terms that need clarification:

• Unreported income is any gross income not reported by you, your spouse or former spouse to the IRS. This would include income from self-contractor work, reported on a 1095; any income reported on a W-2; or any other income the IRS discovers that has gone unreported.
• Improper deduction, credit or basis is any expense that were not really paid, did not qualify as a deduction or for which no factual argument can be made to support the deductibility of the expense claimed.
• Reason to Know is whether you had any actual knowledge of the misreported or omitted taxes. The IRS will determine whether or not there is a basis for your lack of knowledge. The IRS will consider all facts and circumstances in determining whether you had reason to know of an understatement of tax due to an erroneous item. The facts and circumstances include:

• The extent of your participation in the activity that resulted in the erroneous item.
• The nature of the erroneous item and the amount of the erroneous item relative to other items.
• Your educational background and business experience.
• Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question.
• The financial situation of you and your spouse (or former spouse).
• Whether the erroneous item represented a departure from a recurring pattern reflected in prior years’ returns (for example, omitted income from an investment regularly reported on prior years’ returns).

Furthermore, the IRS will also determine whether or not it is fair to hold you liable for the return. The following criteria are some examples that the IRS will consider:

• Your spouse (or former spouse) deserted you or you are divorced or separated from your spouse.
• You received a significant benefit from the understatement either directly or indirectly.

Claiming Innocent Spouse Relief requires the assistance from a tax professional. Bullseye Tax Relief can offer help with all sorts of tax problems. We are an expert in tax resolution. Call us today so that we can guide you through the process or even determine if claiming an Innocent Spouse Relief is the best option for you.

Free Your Bank Account with a Bank Levy Release

 As stated in earlier blogs, the Internal Revenue Service (IRS) has several different tools for collecting a tax debt. Another tool is the Bank Levy. Here, the IRS freezes your bank account and collects whatever money is being held in that bank account. If you do not have enough money to pay your tax debt in full, the IRS will resort to another collection tool, such as garnishing your wages or earnings or attaching a lien to one or more of your properties. There is no escaping death and taxes!

Wait a minute. Actually, there are a couple or tax resolutions available to you. You can request a Bank Levy Release that will free your bank account from the IRS so that they cannot seize the money held there. First, after several letters from them, you will receive a Final Notice of Intent to Levy. If you do not respond and attempt to pay your tax debt via install agreement or payment in full, the IRS will place bank levy on your bank account(s). You have only 30 days to respond to the Final Notice of Intent to Levy before the IRS seizes the money. The IRS can levy all checking accounts and saving accounts attached to your name at any bank.

As the name implies, a Bank Levy Release frees any bank account from a bank levy imposed by the IRS. This means that the IRS can no longer seize those monies to pay your tax debt. There are several methods in obtaining a Bank Levy Release. Here is a list of them:

• Respond to the Final Notice of Intent to Levy before the 30-day response period expires.
• Pay your tax debt in full.
• Entering into an Installment Agreement (IA) or a Partial Pay Installment Agreement (PPIA).
• Request a Collection Due Process (CDP) hearing whereby you can try to persuade the IRS not to levy your bank account(s). This can be your last chance to resolve your tax controversy with the IRS before the collection process begins. Remember you only have 30 days in which to respond to the Final Notice of Intent to Levy. 

There are several other circumstances whereby the IRS may not proceed with imposing a Bank Levy. Here is another list:

• Paying your tax debt in full.
• Filing for bankruptcy during the same time frame the tax debt was assessed. 
• Proving that the collection was incorrectly assessed against you.
• Demonstrating that the collection was assessed after the statute of limitations had passed.

Fortunately, you are given a 22-day grace period after the expirations of the 30-day time frame to respond to the Notice. This means that your monies in your bank account are frozen or set aside instead of being taken immediately. During this 22-day grace period, you may request that the bank levy be released. You must prove or do the following:

• An amended tax return for which you have been assessed the tax debt indicates that you do not owe the tax debt.
• The bank levy was issued in error by the IRS.
• You are behind on other bills.
• Levying your bank account would cause financial hardship, making it impossible to meet your basic living needs.
• The bank levy would make it more difficult for the IRS to collect the full tax debt.
• You entered into an Installment Agreement.
• The IRS approved your request for a Currently Non-Collectible Status (CNC).
• An Offer in Compromise was approved per your request.

Keep in mind that your tax debt or assets are liable to be levied again if you do not pay off your tax debt once the bank levy is released. Once you have received a Final Notice of Intent to Levy, you must immediately consult a tax professional to avoid further complications and liability. We at Bullseye Tax Relief are ready with a variety of tax problems solutions. Just give us a call and we will assess your situation to determine if a Bank Levy Release is your best option. Come back and visit us for more information on tax problems help.