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.

A Wage Garnishment Release Frees Your Wages from the IRS

 As stated in earlier blogs, the Internal Revenue Service (IRS) can attach liens and levies against your personal and/or business assets to collect a tax debt. It can also attach a wage garnishment to your wages and earnings through your employer if you do not establish an installment agreement to pay the tax debt with them. However, obtaining a Wage Garnishment Release will stop the IRS from taking any part of your wages or earnings to satisfy your tax debt.

Just as the IRS can place a tax lien on your business, a wage garnishment is like a tax levy in that the IRS has a right to your property, i.e., your paycheck. Your employer is instructed to withhold a portion of your paycheck and send it to the IRS to make payments against your tax debt. If you are a business with a wage garnishment notice from the IRS for one of your employees, call us for advice on this payroll tax resolution. Wage garnishments are serious. They can affect not only your gross wages or salary, but commissions, bonuses, retirement benefits, disability payments, and VA and social security benefits. 

Before garnishing your wages, the IRS will send you several notices reflecting the amount you owe in taxes before garnishing your wages. The IRS will garnish your wages if you do not attempt to pay off your debt in full or enter into an installment agreement with them. The IRS will NOT notify you that it is garnishing your wages but will directly issue a notification of garnishment to your employer. Your employer will then in turn notify you that your wages are being garnished.

As the name implies, a Wage Garnishment Release “releases” your wages from garnishment by the IRS. You must request a wage garnishment release from the IRS. Here are several main reasons that the IRS will consider before releasing your wages from garnishment:

1. Your tax debt has been paid off in full.
2. You have entered into a collection agreement: (However, failure in paying the agreed amount can led to the IRS garnishing your wages again.)
   1. Offer in Compromise (OIC)
   2. Installment Agreement (IA)
   3. Currently Non-Collectible (CNC)
3. A Wage Garnishment would lead to financial hardship, making it more difficult to pay off your tax debt or pay for basic living expenses.
4. If you have not previously filed for an extension to pay (ETP) for this tax debt, but you have complied with previous payment agreements, the IRS may accept an extension to pay which will automatically release your wages from garnishment.

By amending or filing any missing or incorrect tax returns, you can also reduce the amount of collections owed. By having a tax professional review your tax returns for any missed deductions, you may also reduce your tax debt. The rules and fees that the IRS must follow do not make wage garnishment an ideal method for obtaining full payment of your tax debt. Since it is burdensome, the IRS is reluctant to release a wage garnishment once it is imposed since you were given warning via several notices.

Consulting a tax professional who can evaluate your specific tax situation and advise you on how to proceed is your best course of action, especially if you have received a notice of garnishment from your employer or your wages are already being garnished. Call us today at Bullseye Tax Relief so that we can help you avoid a wage garnishment or release one if one has already been imposed.

A Tax Lien Withdrawal Releases Your Property

 There is one more method of negating a tax lien against a property. A Tax Lien Withdrawal removes the Public Notice of Federal Tax Lien from an asset. This makes it easier to sell or refinance a property or asset. Remember that the Internal Revenue Service (IRS) places a tax lien on property and/or assets when you fail to pay your taxes. This means that you cannot refinance or sell the property to which a tax lien has been attached. The IRS can place a tax lien on personal property for a tax debt owed by your business. Attaching a tax lien to personal property is one tool the IRS uses to impose a Trust Fund Recovery Penalty and collect a tax debt. However, if you enter into a direct debit installment agreement with the IRS regarding this tax debt, you may be eligible for a Tax Lien Withdrawal.

There are two options for eligibility for a Tax Lien Withdrawal:

For Option 1: The lien has been paid off and the property released from the tax lien so that the IRS is no longer prioritized regarding it. Criteria is as follows:

1. All tax returns for the past three years have been filed including individual, business and information returns.
2. All estimated tax payments and deposits are current.
3. Your tax liability has been released.

For Option 2: Direct debit installment agreement allows for the filing of a tax lien withdrawal. This includes converting a regular installment agreement into a direct debt installment agreement in which installment payments are directly paid from your bank account. Criteria is as follows:

1. Qualifying taxpayer: individual, business with income tax liability only and/or out of business entities with any type of tax debt. The IRS can place a tax lien on your business.
2. A tax debt of $25,000 or less is owed. If more than $25,000 is owed, a taxpayer may pay the amount down to $25,000 before requesting a Tax Lien Withdrawal.
3. Other filing and payment requirements are in full compliance.
4. Three consecutive direct debit payments have already been made.
5. There has been no default on current or previous Direct Deposit Installment Agreements.
6. The Direct Debit Installment Agreement must be paid in full within 60 months or before the collection statute expires, whichever is earlier.

There are other considerations for eligibility for a tax lien withdrawal:

1. The tax debt is less than $25,000.
2. Withdrawal of the tax lien is in the best interest of the government and the taxpayer.
3. It would be easier to repay the tax debt is the tax lien was withdrawn.
4. The taxpayer enters into an installment agreement to pay off the past due tax lien.
5. Evidence exists that the tax lien was not in accordance with IRS procedures or was filed prematurely.

The most important eligibility requirement for any Tax lien Withdrawal is entering into a Direct Debit Installment Agreement since installment payments are paid directly from your bank account. You can simply set this up online through the IRS website. You must also provide documentation to support your application for a tax lien withdrawal. Furthermore, you must list the financial institutions you would like notified of the withdrawal of the tax lien.

Applying for a tax lien withdrawal may be the best option for you if are wanting to sell your property and there is a public notice of federal tax lien on your assets, which renders them undesirable to buyers or creditors. Give us a call today to consult with a tax professional about your situation as to whether a Tax Lien Withdrawal is advantageous for you.

Tax Lien Discharge Reverts Property Back to You

 As stated in earlier blogs, the Internal Revenue Service (IRS) has several tools they use to collect back taxes owed: liens, levies, wage garnishments, etc. As the saying goes: there is no escape from death and taxes. The IRS has several means of protecting their interest in the event you fail to pay your tax debt in a timely manner.

The IRS has the power to place a Federal Tax Lien against all of your assets and properties: financial, personal, business and/or real estate. Federal tax liens vary depending upon each individual situation and case. By failing to pay the IRS timely, a lien will be attached to all of your current and future assets until the offending tax issue is resolved. Furthermore, the lien can develop into a levy which empowers the IRS to seize any of your assets to pay your tax debt if you do not address a tax debt in a timely manner. Assets include vehicles, personal properties, jewelry, coin collections, real estate properties, stocks, bonds, cash, bank accounts, even bitcoin. Resolving your tax debt prevents a lien from being assessed or resolves one that has already been attached to any of your properties. 

It is called tax lien discharge. A discharge removes the tax lien from the specific property to which it was attached, but not to every tax lien. A discharge is specific to which property is affected. Once a tax debt is satisfied, the IRS grants a tax lien discharge if it accepts your request for discharge. The IRS will issue you a Certificate of Discharge which will allow you to sell, refinance or “retrieve” the property that had the tax lien attached to it.  

Anyone wishing to sell or refinance a real estate property with a tax lien attached to it should apply for a Tax Lien Discharge. Otherwise, you will have difficulty in selling or refinancing the property since the tax lien remains with the property until it is discharged. Although the new owners would not be subject to paying the tax debt, the IRS would still be able to place a lien against the property and seize it. Most potential buyers would not want this liability and so the tax lien would likely discourage any buyers. 

Applying for a tax lien discharge requires completing forms regarding the appraised value of the property, its description and the basis for a discharge. The IRS must be satisfied that granting the tax lien discharge would not jeopardize their interest in the property. In other words, the IRS would still be paid the amount owed without the use of a tax lien. The IRS would consider the following in granting a tax lien discharge:

• Proof that the value of the property is worthless to the IRS. For example, you owe more on the property than an appraisal states that it is worth.
• You have other valuable assets attached to the tax lien.
• You can sell the property and provide the proceeds to the IRS.
• You can pay the IRS an amount equal to the interest they have on the property.

Once the IRS approves your application for a tax lien discharge, they will send you a Certificate of Discharge for that property. You can then:

• List the property for sale without the liability of a tax lien attached to the property.
• Refinance the property and use the money to pay toward your tax debt.
• Sell the property outright and use the proceeds to pay the tax debt in full.

However: 

• You would still owe any remaining tax debt along with penalties and interest.
• The discharge only applies to the specific property named on the Certificate of Discharge.
• Any other property attached to the tax lien would remain attached and subject to levy if the tax debt is not paid in full.

Since this process is complicated and any mistakes may make the situation worse, it is advised to consult a tax professional. Call us today so that we can determine your best options. More tax resolutions will be discussed in the coming blogs, so please visit us again.