What Is IRS Wage Garnishment? Why IRS Levy Wages

What Is IRS Wage Garnishment?

If you have back taxes, IRS is then authorized to seize your wages or properties and take a portion of your paycheck. However, to do this, strict guidelines must be followed. IRS will get in touch with your employer and instruct them accordingly to take a portion of your pay. Your employer will also send the money to the agency. The employer should comply with this right away or else the liabilities could be passed on to him or her. Understanding the rules of engagement with IRS wage garnishment will arm you with the knowledge to file for an appeal or stop it.

How Much of Your Salary Can the IRS Garnish?

If you fail to comply or resolve the issue upon receipt of the Notice of Your Right to a Hearing and Final Notice of Intent to Levy, IRS will then proceed with garnishing your wages.

IRS has the power to garnish bonuses, salaries, commissions, wages, and even your pension and retirement fund. The IRS will not just take out a specific percentage of your wage. It will instead dictate how much you would need and then garnish the rest. The IRS makes a decision based on a table that helps them to determine the amount that can levy from your salary for each pay period. The amount that is exempted from IRS levy will depend on the standard deduction imposed on your pay as well as the number of dependents that you have. More so, your filing status, the number of exemptions you have as well as your payment frequency will help your employer determine the specific amount of money that you get from each pay period.

The amount that will be left in your paycheck would most likely be below your spending needs. As of 2017, single individuals with one exemption will be left with only $200 per week or equivalent to $866.67 monthly. Now, if you are married and filed jointly declaring four dependents, then you get to keep $555.77 weekly or about $2408.33 monthly. So, with that in mind, any excess amount can then be taken by the IRS.

For instance, if you juggle two jobs and the other one covers your daily expenses, IRS may take 100% of your salary from that other employment you have. Also, if your employer gives you a bonus, IRS may also take that.

This levy stays in effect until you have completely paid off of your tax debt, or if you have made some arrangements or alternative payment options, with IRS. In the same way, the agency will also release or stop the levy once the statute of limitations imposed on collection is in place.

When Will IRS Implement a Wage Levy and Garnish Wages?

Tax levy  follows after a tax lien and when you have been delinquent in tax payments. There are some instances, though, that IRS would skip the tax lien and rolls out the levy process right away.

A tax levy is the process wherein IRS seizes your assets in order to satisfy tax owed. IRS has the authority to collect from your wages, properties, Social Security benefits, bank accounts, property, commissions, retirement accounts, rights to property, and so forth. If you are working for an employer, IRS can go for a wage levy to garnish a percentage or all of your paycheck. In order to levy properties, paycheck, or any form of assets, the agency must adhere with the following rules and requirements.

  • IRS has reviewed tax liability and sent taxpayer a notice to demand for Payment.
  • The taxpayer has refused or failed to settle tax owed.
  • IRS has forwarded you two notices – Notice of Your Right to a Hearing and Final Notice of Intent to Levy which must be sent to the taxpayer 30 days before the levy is in effect.

 

IRS has two delivery options: send the notices via registered mail to your home address or employment address or deliver the notices by hand. Either way, once you receive the notices of Final Notice of Intent to Levy and Notice of Your Right to a Hearing,  IRS can now proceed to levy after a period of 30 days.

IRS Levy Exceptions that Does Not Provide a 30-Day Advance Notice

The IRS will not always give you that 30-day standard notice to remind you of your right to hearing. They may move forward to levying your property or seizing your assets. Below are some scenarios that do not warrant any advance notices:

  • Jeopardy Levy – In the event that IRS feels tax collection activities are in jeopardy, then they can go ahead with levying your property without the need to send out a notice in advance.
  • A Disqualified Employment Tax Levy – If in case, you have already requested before for a collection due process hearing for employment taxes or payroll for a particular tax period in the last two years, then the IRS can proceed to levy for the other tax periods even without providing you any advance notice of such activities.
  • Federal Contractor – Being a federal contractor, the IRS can automatically seize your assets or properties without any advance written notice.
  • State Tax Refund Levy –  IRS can go ahead to levy state tax fund without providing you advance notice.

Requesting for an appeals conference at the earliest possible time or within the 30-day period can help deter wage levies or seizure of your assets

 The IRS would rather not impose such wage levies because these activities are not cost-efficient. IRS would rather use such as a threat to evoke action.

However, if all else fails and you do not file any dispute to challenge such levies then IRS will push through with levying your wages or properties. In order to prevent this, it is advisable to request for a free consultation from a licensed tax specialist to help you weigh your options before responding to a final notice. A licensed tax professional can directly get in touch with the IRS to renegotiate and apply for the most suitable payment plan such as for hardship status or settlement; among others.

 

How Senate Tax Bill Disallows Excess Business Losses In Pass-Through Entities

A summary of the Senate Finance Committee’s “Tax Cut & Jobs Act” is now available, alarming owners of pass-through entities with a provision that serves to limit net business losses deducted on an active owner’s tax return.

The Senate’s bill summary extends the present law for “excess farm losses” to owners who are active in a trade or businesses operating as pass-throughs, including sole proprietors, partnerships, and S-Corps. (Apparently, it’s no longer just for certain farming businesses!)

The maximum allowed loss is the threshold amount of $500,000 married and $250,000 single , indexed each year for inflation. The summary lacks essential details, so it is not clear if the loss limitation is per tax return or investment.

The excess business loss becomes a net operating loss (NOL) carryforward, which a taxpayer may use against any income in the subsequent year. Both the Senate and House bills are proposing to repeal NOL carrybacks and limit NOL carryforwards to 90% of taxable income in the year applied. Both bills repeal the standard two-year NOL carryback, only allowing NOL carryforwards. The GOP Congress seems to be working hard to disenfranchise small business owners from tax benefits they have under present law. This one-two punch constitutes a massive tax hike on small businesses and will have a chilling effect on job creation. The House tax cut bill does not have an excess business loss limitation.

The excess business loss rule is not as draconian as the passive activity loss rules. Losses from passive activities may only offset other passive activities with net income, until and unless the taxpayer sells the investment realizing the loss. The excess business loss rule for active businesses allows a reasonable loss amount, and the excess is an NOL carryover, which is more useful and valuable than a suspended passive loss.

Entrepreneurs with substantial capital investment may have losses that exceed the threshold, and the Senate is proposing to force them to wait at least one year to get a tax refund.

Here’s an example of how the Senate’s excess business loss provision would work:

Joe Smith leaves his job in 2017 to pursue his dream, a technology start-up. Joe is single and invests $500,000 of capital, and so does his partner Mary White, who is married. The 2018 LLC partnership tax return reports a net loss of $700,000. Each active partner shows a $350,000 loss on 2018 individual tax return Schedule E.

  • Article from Forbes. Click here to get to the original post

The GOP Tax Reform Bill (The Ugly Truth)

Without getting into every combination and income bracket allow me to point out that the GOP so‐called tax break is nothing more than corporate multi‐national welfare designed to attract manufacturing back to the U.S. as we love to reform immigration and this entire Kabuki Theater is designed to help major  corporations so they will employ U.S. workers/immigrants yet to arrive here.

If you live in California and have $180,000 income here is before and after; AND the more you make, married or not, the more you will pay and less you will have!
Under Current Tax Law
$180,000 Income in CA

Tax Type     Marginal Tax Rate     Effective Tax Rate       Tax Amount
Federal              25.00%                              13.75%                           $24,753
FICA                   1.45%                                   5.83%                            $10,496
State                  9.30%                                  4.89%                            $8,797
Local                  0.00%                                 0.00%                           $0
Total Income Taxes                                                                               $44,046
Income after Taxes $135,954

Under the New GOP Tax Bill
$180,000 Income in CA
Tax Type    Marginal Tax Rate       Effective Tax Rate        Tax Amount
Federal                  28.00%                                    21.33%                        $38,389
FICA                        1.45%                                         5.83%                         $10,496
State                       9.30%                                        7.66%                         $13,780
Local                       0.00%                                       0.00%                        $0
Total Taxes          38.75%                                  34.82%                     $62,665
Income after Taxes $117,335

This could be as much as 42% hike in taxes under the new GOP Plan

Watch for our new methods of assisting you in designing effective ways to keep more of your money by enhancing your business structure and planning your business taxes in more effective methods! Investor dinner in San Diego January 17, 2018.

Well, that was fast.

Just six weeks after lawmakers and the public got their first glimpse of the first draft of a tax overhaul bill, Republicans on Friday released their final version. They aim to pass it next week and send it to President Trump for his signature.

The final bill still leans heavily toward tax cuts for corporations and business owners. But it also expands or restores some tax benefits for individuals relative to the earlier bills passed by the House and Senate.

The individual provisions would expire by the end of 2025, but most of the corporate provisions would be permanent.

All told, the final bill includes trillions in tax cuts, most of which but not all are offset by revenue-raising measures. The bill on net would increase deficits by an estimated $1.46 trillion over a decade, according to the nonpartisan Joint Committee on Taxation. That number would be much higher if, as Republicans
assume, a future Congress does not allow the individual tax cuts to expire after 2025.

Some important notes:
The bill would not affect 2017 taxes, for which Americans will start filing their returns in a month or so.

Some pitfalls you will want to pay attention on:
LLC’s, Partnerships, and S-Corporation service businesses
Itemized Deductions
State and Local Taxes (SALT)
Real Estate Market could suffer huge downturn!

With that, here’s a quick rundown of 16 key provisions in the final bill.

FOR INDIVIDUAL FILERS
1. Lowers (many) individual rates:
The bill preserves seven tax brackets, but changes the rates that apply to:
10%, 12%, 22%, 24%, 32%, 35% and 37%.
Today’s rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
Here’s how much income would apply to the new rates:
— 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
— 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
— 22% (over $38,700 to $82,500; over $77,400 to $165,000 for couples)
— 24% (over $82,500 to $157,500; over $165,000 to $315,000 for couples)
— 32% (over $157,500 to $200,000; over $315,000 to $400,000 for couples)
— 35% (over $200,000 to $500,000; over $400,000 to $600,000 for couples)
— 37% (over $500,000; over $600,000 for couples)

2. Nearly doubles the standard deduction: For single filers, the bill increases it to $12,000 from $6,350 currently; for married couples filing jointly it increases to $24,000 from $12,700. The net effect: The percentage of filers who choose to itemize would drop sharply, since the only reason to do so is if your
deductions exceed your standard deduction.

3. Eliminates personal exemptions: Today you’re allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. Doing so lowers your taxable income and thus your tax burden. The GOP tax plan eliminates that option. For families with three or more kids, that could mute if not negate any tax relief they might get as a result of other provisions in the bill.

4. Caps state and local tax deduction: The final bill will preserve the state and local tax deduction for anyone who itemizes, but it will cap the amount that may be deducted at $10,000. Today the deduction is unlimited for your state and local property taxes plus income or sales taxes. The SALT break has been on the book for more than a century.

The original House and Senate GOP bills sought to repeal it entirely to help pay for the tax cuts, but that met with stiff resistance from lawmakers in high-tax states. Residents in the vast majority of counties across the country claim an average SALT deduction below $10,000, according to the Tax Foundation. So for low- and middle-income families who currently itemize because of their SALT deduction, they’re likely to take the much higher standard deduction under the bill if it becomes law, unless their total itemized deductions, including SALT, top $12,000 if single or $24,000 if married filing jointly.
Preserving the break — albeit with a cap — is likely to provide more help to higher income households in high-tax states.

5. Expands child tax credit: The credit would be doubled to $2,000 for children under 17. It also would be made available to high earners because the bill would raise the income threshold under which filers may claim the full credit to $200,000 for single parents, up from $75,000 today; and to $400,000 for married couples, up from $110,000 today. Like the first $1,000 of the child tax credit, $400 of the additional $1,000 also will be refundable, meaning a low- or middle-income family will be able get the money refunded to them if their federal income tax liability nets out at zero. Even with the additional $400 in
refundability, however, 10 million children from working low-income families would receive only an additional $75 in benefit under the bill, according to the Center on Budget and Policy Priorities estimates.

6. Creates temporary credit for non-child dependents: The bill would allow parents to take a $500 credit for each non-child dependent whom they’re supporting, such as a child 17 or older, an ailing elderly parent or an adult child with a disability.

7. Lowers cap on mortgage interest deduction: If you take out a new mortgage on a first or second home you would only be allowed to deduct the interest on debt up to $750,000, down from $1 million today.

Homeowners who already have a mortgage would be unaffected by the change. The bill would no longer allow a deduction for the interest on home equity loans. Currently that’s allowed on loans up to $100,000.

8. Curbs who’s hit by AMT: Earlier bills called for the elimination of the Alternative Minimum Tax. The final version keeps it, but reduces the number of filers who would be hit by it by raising the income exemption levels to $70,300 for singles, up from $54,300 today; and to $109,400, up from $84,500, for married couples.

9. Preserves smaller but popular tax breaks: Earlier versions of the bill had proposed repealing the deductions for medical expenses, student loan interest and classroom supplies bought with a teacher’s own money. They also would have repealed the tax-free status of tuition waivers for graduate students.
The final bill, however, preserves all of these as they are under the current code. And it actually expands the medical expense deduction for 2018 and 2019.

10. Exempts almost everybody from the estate tax: Unlike the House GOP bill, the final bill does not call for a repeal of the estate tax. But it essentially eliminates it for all but the smallest number of people by doubling the amount of money exempt from the estate tax — currently set at $5.49 million for individuals, and $10.98 million for married couples. Even at today’s levels, only 0.2% of all estates ever end up being subject to the estate tax.

11. Slows inflation adjustments in tax code: The bill would use “chained CPI” to measure inflation, which is a slower measure than is used today. The net effect is your deductions, credits and exemptions will be worth less — since the inflation adjusted dollars defining eligibility and maximum value would grow more slowly. It also would subject more of your income to higher rates in future years than would be the case under the current code.

12. Eliminates mandate to buy health insurance: There would no longer be a penalty for not buying insurance. While long a goal of Republicans to get rid of it, the measure also would help offset the cost of the tax bill. It is estimated to save money because it would reduce how much the federal government spends on insurance subsidies and Medicaid. The Congressional Budget Office expects fewer consumers who qualify for subsidies will enroll on the Obamacare exchanges, and fewer people who are eligible for Medicaid will seek coverage and learn they can sign up for the program. But policy experts also note that the mandate repeal could raise premiums because more healthy people might decide to skip buying insurance.

Note:
Automatic government spending over the next 10 years will add $9.1Trillion to the deficit plus $1.5Trillion to pay for this bill as calculated today; interest rates WILL go up over next 10 years more than projected! Watch out real estate market!

FOR BUSINESSES AND CORPORATIONS
13. Lowers tax burden on pass-through businesses: The tax burden on owners, partners and shareholders of S-corporations, LLCs and partnerships — who pay their share of the business’ taxes through their individual tax returns — would be lowered by a 20% deduction, somewhat less than the 23% called for in the Senate-passed bill. The 20% deduction would be prohibited for anyone in a service business — unless their taxable income is less than $315,000 if married ($157,500 if single). BUT even then there are traps
and you may wish to consider reorganizing your business structure!

14. Includes rule to prevent abuse of pass-through tax break: If the owner or partner in a pass-through also draws a salary from the business, that money would be subject to ordinary income tax rates. But to prevent people from recharacterizing their wage income as business profits to get the benefit of the passthrough deduction, the bill would place limits on how much income would qualify for the deduction. Tax experts nevertheless have warned that this kind of anti-abuse measure still presents taxpayers with a lot of opportunities to game the system, and favors passive owners of a business over active owners who actually run things.

15. Slashes corporate rate: The bill cuts the corporate rate to 21% from 35%, starting next year. That’s somewhat higher than the 20% called for earlier. The increase was made to free up some revenue to accommodate lawmaker demands on other provisions. The bill would also repeal the alternative minimum tax on corporations.

16. Change how U.S. multinationals are taxed: Today U.S. companies owe Uncle Sam tax on all their profits, regardless of where the income is earned. They’re allowed to defer paying U.S. tax on their foreign profits until they bring the money home. Many argue that this “worldwide” tax system puts American businesses at a disadvantage. That’s because most foreign competitors come from countries with territorial tax systems, meaning they don’t owe tax to their own governments on income they make offshore. The final GOP bill proposes switching the U.S. to a territorial system. It also includes a number
of anti-abuse provisions to prevent corporations with foreign profits from gaming the system.

In the meantime it would require companies to pay a one-time, low tax rate on their existing overseas profits — 15.5% on cash assets and 8% on non-cash assets (e.g., equipment abroad in which profits were invested), slightly higher than the rates in the Senate- and House-passed bills.

This is a first step to opening the doors to immigration reforms that will radically transform our country by providing the financial incentives in the tax system.

How IRS Property Seizures Work and How to Stop a Levy

Taxpayers who failed or ignored to settle their tax debts will be eligible for an IRS levy since the IRS has the right to seize properties.

If you’re behind on your tax debt, you must understand how IRS property seizures work for you to avoid the occasion of a tax levy.

What are the IRS Seizure Processes?

The IRS can legally seize your assets, but they have to do the three steps first to be fair with the individual who owe taxes. The IRS must see to it that the following have been done:

  • A “Notice of Demand for Payment” has been sent to you
  • No response or payment arrangements have been settled with IRS within the allowed timeframe
  • A “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” have been issued

The final notice must be sent to you personally or known address via certified mail. You are given maximum of 30 days to appeal or agree with a payment arrangement.

What are the Properties that can be Seized by IRS?

Personal properties and real estate can be seized by the IRS, even if it’s not in your house or location. For instance, if you have a boat that’s in a family member’s house, the IRS can seize that.

Anything that has monetary value even wages, rent from your tenants, retirement funds, and savings in your bank account—can be taken away from you. Mind you, the IRS is very powerful that it can demand anyone’s holding or giving you money to send it to them directly.

The IRS can seize almost anything you own, including your house. However, there’s a table that determines the wages exempt from an IRS levy.

What are the Properties the IRS Cannot Take?

The IRS can take almost anything: properties, wages, and income. But there are several things the IRS cannot levy:

  • Minimum wages
  • Unemployment benefits
  • Income for court-ordered child support payments
  • Worker’s compensation
  • Furniture or items inside the home
  • Job Training Partnership Act assistance
  • Some Annuity and pension payments
  • Some Service-connected disability payments
  • Tools needed for business or work
  • Main residence which requires a U.S District Court to approve the sale

How to Request a Collection Due Process Hearing

Once you receive a notice of intent to levy and you don’t agree with the decision, you can appeal to have a Collection Due Process (CDP) hearing. You must submit IRS Form 12153, which is a request for Collection Due Process or Equivalent Hearing. You can increase your success rate by hiring a tax professional.

During the Collection Due Process hearing, you should convince the IRS on why they should not seize your assets. One example is that the IRS have erroneously assessed your taxes or that you have already settled the taxes you owed. You can also move forward some concerns involving an ex-spouse who should have been liable for the tax debts, not you.

The Office of Appeals will decide about your case. And if you’re still not convinced, you can submit another appeal within 30 days.

How to Stop the Levy on Your Wages, Tax Refund, or Bank Account

IRS levies or garnishment continues until such time your debt is full paid or the IRS have decided to release the levy.  At the same time, the IRS will keep your tax refunds and apply them to your tax liabilities.

The straightforward answer on how to stop wage garnishment is either you pay the tax debt or enter into a payment agreement with the IRS.

However, bank account levy can be decided by the IRS, which will freeze your funds for 21 days.  The money from your bank account will go to the IRS. If you don’t wish to have this as a consequence of not paying your taxes, then you should set up a payment option or a resolution with the IRS within 21 days.

How a Property Levy Works

A revenue office will come to your home or business address should the IRS decides to seize your property. They may tow away the vehicles found in front of your home. They can enter the garage or house that’s considered a private property.

No one can stop the IRS from entering you private property because they will provide a Writ of Entry, a legal document, that allows a revenue officer to enter private areas to seize properties.

How to Get Help to Stop a Tax Levy

Don’t wait for a  couple of days or weeks before you act. You must get in touch with the IRS or tax professional immediately.  You may also request for a Collection Due Process hearing.

Make sure to appeal within 30 days or else you will miss the chance for a hearing.

 

 

Tax Levy Help: Relief from an IRS or State Tax Levy

One of the things that a person would not want to experience is a tax levy.

The Internal Revenue Service and many states are powerful enough to garnish your wages or levy your bank account.

They can take other types of property from you to compensate for your tax liabilities. Real estate properties and vehicles can also be seized. The IRS or State will demand the individual to file unfiled tax returns before the tax levy is lifted or reduced.

How Do Tax Levy Services Work?

Most tax firms begin the process with a free consultation, which helps tax professionals understand both your tax and financial situation.

It’s best to keep your tax letters or notices and show them during the initial consultation.  It’s also good to take note your monthly income and expenses, including the total assets and liabilities.

Usually, at the end of the consultation, the taxpayer will get some ideas and steps to stop a levy, including the associated fees. The taxpayer is not obliged to continue. Some tax firms offer free investigation to give you accurate amount you will have to spend with the IRS or State. Once you decide to continue, you will be provided with Form 8821 and/or Form 2848 (Power of Attorney) if it is an IRS issue. If it’s just a tax issue concerning the state, you will need to accomplish different set of forms, but some states use IRS forms for state tax issues.

Form 2848 or the respective state tax Power of Attorney must be on file before a licensed tax professional initiates a discussion with the IRS or State. In fact, it is the IRs or State that will contact the tax professional. The process can take an average of 30-60 days and that is based on the tax situation and the resolution option that will be considered.

A tax resolution service will give you advice or guidance to prevent tax problems from recurring.

Is it advisable to hire a Tax Professional?

Yes, most of these tax professionals are licensed and experienced. As what have been mentioned already, the IRS or state prefers talking to a tax professional than to a taxpayer because the former knows the process. Any experienced tax professional can improve your chance of getting a proposal and your appeal will be accepted.

 

 

How to Stop an IRS Levy

An IRS levy is a straightforward IRS collection mechanism.

A notice or intent to levy should not be ignored because the IRS is true to its word that it will seize your assets if you don’t comply. It’s actually a case to case basis, but you can arrange a payment method, seek tax relief services, or appeal to stop the IRS levy.

But the IRS is willing to help you when you reach out. Seizing of properties would the last and most cruel way the IRS will delve into to collect taxes. But the IRS prefers to get into seizing other people’s properties as much as you do.

What are the Ways to Stop an IRS Levy

There are some ways to prevent the IRS from taking away your assets. You must choose a payment arrangement that works for your financial condition. Below are some arrangements you can take with the IRS.

Remember, in almost all of these cases, you generally need to file all tax returns due.

Pay the Amount in Full

Paying in full is the most effective way to stop everything that is causing you stress. Some taxpayers with tax debts will sell off their assets or borrow from friends or family members just to pay the full amount.

You may consider getting a loan with small interest than the IRS penalty charges or interest.

Installment Agreement

The installment agreement allows you to pay off your tax debts over time. You need to complete the payments within 84 months or less. The interests usually accrue, but the IRS will reduce the penalty by 50 percent if you pay on time.

Partial Payment Installment Agreement

This is almost the same to regular installment agreement but you will pay what you are able to afford on a monthly basis. The IRS usually reviews your financial situation and determine what you can pay every month. In most case, the collection activity will stop.

Offer in Compromise

This offer means the IRS has given you the opportunity to pay your tax debts less than the amount you owe. This, however, requires strict financial criteria for you to qualify. This includes a proof that you won’t be able to pay the total amount through the available payment terms or methods.  Usually, the IRS won’t allow an offer in compromise if they think there is no other way to get more money from you.

Innocent Spouse Relief

This is a rare form of tax settlement since the spouse are jointly liable for the debt.  

However, if you can prove that you were “innocent” and not liable for the debt, you may qualify for relief and avoid a tax levy. There are a number of qualifications you need to meet.

Currently Not Collectible (CNC Status)

If you can prove the IRS that you’ll be struggling financially and your family with suffer, then the IRS can have you under the Currently Not Collectible status. If you won’t be able to pay the IRS and your basic living standards will be compromised, the collection activities will stop but the sad part it that the interests and penalties will continue to grow.

Tax Identity Theft

There are rare instances of tax identity theft and you can go ahead to prove it. Tax identity theft happens when your identity is stolen to request a refund using erroneous deductions or credits. Your identity can also be used to collect 1099 income or W2 wage income in some cases if your employer does not withhold taxes. If you believe you’re a victim of tax identity theft, then you need to prove it.

The IRS will stop all its collection activity and will not seize your assets if a tax identity theft has been proven. You have the right to appeal if you are confident that you don’t owe the tax reflected on the notice.

How to Appeal the Intent to Levy

You always have the right to appeal to the Collection Due Process if you are doubtful about the IRS’ decision on Final Notice of Intent to Levy.

You can use Form 12153 to request a hearing from the Collection Due Process. But keep in mind to appeal only with 30 days after receiving the notice. You can find the deadline on the notice.

You must also call the IRS. There are some instances that the issue is resolved over the phone, but it’s better to undergo the appeals process because the IRS cannot levy your assets when you have a pending appeal. If a simple phone call solves the issue, you can cancel the appeal, but if the phone call is not enough, then you should pursue the scheduled hearing.

How to Seek Help If the IRS Is Constantly Telling you it will Levy Your Assets

The IRS can threaten you to levy your assets and that warning means that you should act immediately.

An IRS levy is a very harsh move to collect taxes, and worst, you’ll struggle financially. It’s important to consider hiring a tax relief professional to resolve your tax concerns. Make sure to deal with a competent professional to help you with a tax resolution.

 

What is an IRS Notice of Intent to Levy

An IRS intent to levy notice means that the IRS is serious in its warning that it will seize your assets. This notice is sent to those people who ignored the letters or notices sent to them, and worst, failed to pay their tax debts.

Remember the IRS has no right to take your assets unless a notice to levy is sent to you. These are the following steps the IRS should make within 30 days before seizing your assets:

  • Send you a written notice of the intent to levy and inform you about your right to appeal
  • Explain the reason for the levy, the seizure process, and options you can have to address your issue
  • Deliver the notice personally or send it to the address via registered mail

What are the assets the IRS can seize if you don’t pay your taxes?

There’s no particular list of assets the IRS has provided, and they leave it that way so they can take almost anything from you that has value. These include:

  • Property such as cars, house, or any personal property
  • Rights to property
  • Money in your bank accounts
  • Social Security benefits
  • Salary from your employer
  • Contractor or vendor payments due to you
  • Employee travel advances
  • Commissions
  • Retirement benefits
  • Government retirement benefits from the Office of Personnel Management (OPM)

Again, the IRS can take anything you own and leave you with nothing. However, the IRS has a table for the income threshold that determines those who are exempt from levy. This table applies to wages, salary, and other incomes. It should be taken into account your filing status and the total number of exemptions you had on your latest tax return.

What Notices Should the IRS Send If It Plans to Seize Your Assets?

There are different notices and/or letters the IRS sends to the taxpayer.

Below are the letters or notices:

  • CP 504
  • CP 90
  • LT 1058
  • LT 11
  • CP 297

What Should You Do once You Receive an Intent to Levy Notice?

The most logical way is to pay the full amount of the tax debt to stop the IRS from taking your assets. Once you settle the payment, the IRS will automatically discontinue bugging you with its collection activities.

If you can’t pay the entire amount, the IRS has several payment options such as an installment agreement or an Offer in Compromise. With this in mind, it’s always best to get a licensed tax professional when dealing with the IRS.

Installment Agreement

An Install Agreement is acceptable for you to make monthly payments to cover your tax liability. This settlement reduces the failure to pay the penalty by 50 percent, but this does not prevent the IRS from assessing the interests.

The IRS will not take your assets if you can make timely payments.

Offer in Compromise

The IRS agrees to have this Offer in Compromise, wherein you will pay less than the amount owed. This settlement is offered only there are no other ways to do it. But, based on figures in 2016 alone, there are only 43% who got accepted in this agreement. All collection activities will be stopped once an Offer in Compromise is allowed and paid.

Since not everyone will be accepted and the process is quite complex, it’s best to seek some professional help.

Currently Not Collectible or CNC Status

Another term used to describe CNC is a hardship status. You will have to provide a collection information statement to the IRS stating that if the IRS continue to seize your assets or collect money from you it would be very difficult for you and your family to make both ends meet.

Innocent Spouse Relief

Maybe it was your spouse’s fault that led to a tax liability. The good news is you can file an Innocent Spouse Relief with the IRS. But this requires certain qualifications to be accepted.

Can I Appeal if I Don’t Agree with the Decision to Levy?

Yes, you can always appeal if you are not convinced with the IRS’ decision of levying your assets. Make sure to call the number on the notice. Remember that calling the IRS is different from filing an appeal. You only have 30 days allowed to appeal before the IRS starts levying your account.

The IRS can also make mistakes. If you have already proceeded with an installment agreement, you may call the IRS and make sure that it is reflected in your account.

 

 

 

What is a Tax Levy?

A tax levy happens when the IRS seizes a property or asset to cover any tax liability because the taxpayer has failed to pay for his or her tax debts and get into a tax settlement with the IRS.

A tax levy is the most aggressive way of the IRS to collect money from your tax debts. The IRS is the most powerful collector in the United States.

Will the IRS Levy Your Assets?

You must have received a lot of IRS notices. When the IRS starts to levy your assets, this means that the following situations had happened:

  • The IRS have continuously asked you to settle your tax debts
  • You didn’t pay your tax debts on the agreed date set by the IRS
  • The IRS sent you a notice about the levy and gave you at least 30 days to appeal

Remember that you will be given 30 days before the IRS can levy your assets. You will need to appeal and set up a payment plan or other arrangements.

What are the properties can the IRS levy?

The IRS will make it difficult for you to live a normal life back again, particularly if you have a family. They will inform the people or organizations that give you money to send any future payments directly to IRS. These people or organizations will prefer to follow the IRS rather than make you a priority. If they won’t comply, they will be held responsible for those amounts.

IRS Wage Garnishment

A wage garnishment is the most common form of IRS levy. The IRS will demand your employer to withhold a particular percentage of your wages. Your employer cannot fire you for the mere reason of a wage garnishment, but this is embarrassing and financially draining. In most cases, the garnishment continues until the debt has been settled or an alternative payment has been arranged.

IRS Bank Levy

In this scenario, the IRS will request for the funds in your account. You are given a 21-day grace period to solve the issue. When the considerable time period lapsed, your funds will be frozen in your account, and you won’t be able to use or withdraw them.

IRS Social Security Levy

Your Social Security cannot escape the hands of the IRS. The IRS can demand the Social Security Administration to send them 15 percent of your payments.

IRS 1099 Levy

If an independent contractor is owed money by a business or individual, the IRS can ask for money owed to the contractor to be sent to the IRS.

The IRS can issue a series of 1099 levies to collect on 1099 income. The IRS, in its power, can contact the holder of your retirement account, the tenants who rent in the buildings or properties you own, or anyone else who sends you payment.

Other Property the IRS Can Seize

The IRS can seize properties, including land, cars, real estate, and boats. Anything that has value and can be sold at an auction can be taken by the IRS to cover for the tax debts. But they rarely seize those types of properties mentioned, and they will do it under extreme situations.

How Can You Stop a Tax Levy?

If you have been receiving notices from IRS, you should not ignore those letters and must take action right away.

A tax professional’s crucial job is to get you into good standing with the IRS and State. A taxpayer’s responsibility is to get into filing compliance to set up a resolution with the IRS or State.

You cannot stop the IRS from seizing assets once they have given you the chance to appeal. The key is you need to take action straight away once you’ve received the very first notice from IRS.

Tax Lien: Frequently Asked Questions

How will I know if a tax lien has been placed on my property?

The IRS will first assess the taxpayer’s liability and require a payment. Failure to pay within 10 days will prompt the IRS to send out a notice of tax lien.

The IRS notice of federal tax lien is a way to compel the individual to pay for his or her tax liability. The IRS notice is in a form of a mail/letter or it can also be a phone call. You will receive the IRS notice of federal tax lien after the lien has been filed.

How will a tax lien affect me?

A tax lien prevents you from getting a credible credit standing. Any hint of a lien on your property will alert creditors and lenders about this and you will have negative credit report.

The IRS is powerful that is has a claim before any other creditors, making it extremely difficult for you to make future purchases and borrow money.

Otherwise, those people with tax liability of less than $25k and arranged a direct debit installment agreement can request to have the tax lien removed from public records. They also have to demonstrate a successful payment history.

Which property is subject to a tax lien?

The truth is there is no complete list of properties that can be subject to a tax lien. This is intentional since it aims to cover almost any types of property a tax delinquent currently have or will acquire in the future.

The list of properties is broad enough that can be both tangible assets and intangible assets.

Can a tax lien be released?

Yes, of course! You need to settle your tax obligations before the IRS releases your tax lien.

How can a tax lien be released? You can pay a tax lien in full, go through an Offer in Compromise, or just let the statute of limitations expire on the tax debt. The IRS may also accept a bond that secures your payment for the taxes you owe.

If you have already paid your tax debts and it’s still affecting you in some ways, you need to contact the IRS and request your tax lien to be withdrawn.

How can I avoid a tax lien?

The most logical answer is to be a responsible taxpayer.

Unfortunately, there are some life events that will make it very difficult for you to pay your taxes. It is best to contact the IRS and arrange a payment agreement with them. Ignoring the IRS notice of federal tax lien is the worst step you shouldn’t do.

What are the reasons of the IRS for filing a tax lien on my property?

There’s no reason other than failure to pay your income taxes.

It has been reported that tax liens happen when you owe $10,000 or more, but it can be filed for smaller debt amounts.

There are various reasons why some individuals are not able to pay their taxes. But the IRS is way clever enough to hunt those who are trying to avoid their tax obligations. The consequence is that the IRS will place a lien on their properties to compel them to pay their tax due.

What is the difference between a tax lien and tax levy?

A tax lien is the government’s “claim” of your property, but a tax levy is the actual seizure of your assets. The tax levy allows the IRS to take control of your bank accounts, garnish wages, and take over your properties.

 

 

 

 

 

Appealing a Tax Lien

Within five days of filing a tax lien, the IRS will send out a notice of lien to the individual with tax debt.

This notice will give you the right to request for a hearing, which must be done within 30 days after the fifth day when the lien was filed. In order to appeal, you must request an IRS manager to review your case or ask the Collection Due Process hearing with the office of appeals. And for you to be considered for an appeal, you must request the appeal by the date noted on the IRS notice you received. If you appeal the lien and win, the lien will be released.

An IRS tax appeal gives you the right to question IRS collection actions, penalties, interests, and more.

It’s also possible to come into terms with the Collection office. You can call the phone number found on the notice and explain why you don’t agree with the notice, making it possible for an appeal. Keep in mind that this contact doesn’t extend the 30-day period you are required to have a formal written request for a collection due process hearing, so it’s a clever idea to do both processes.

If you have been successful in resolving those issues over the phone chances are you can withdraw the request for a hearing. But if not, you can work with the office of appeals.

When will the IRS Consider Appealing a Lien

After a tax lien is filed, there are several options for it to get appealed. If you fall into any of these categories, you must file for the appeal within 30 days after the receipt of notice.

When the request is approved, these are some of the issues you can discuss with the IRS to have your tax lien appealed:

  • The taxes had been paid in full before the lien was filed
  • An error was made in processing or filing the lien
  • You were experiencing bankruptcy when the lien was filed
  • The statute of limitations had already lapsed on the taxes you own before the lien was filed
  • You were denied the opportunity to argue the tax debt amount insisted by the IRS
  • The IRS made a processing error when processing your return
  • You want to keep your spouse liable for the taxes owed, not you
  • You want to discuss other payment options such as Offer in Compromise or Installment Agreement

How to Request a Hearing with the Office of Appeals

You must secure IRS form 12153, Request for a Collection Due Process (CDP) or Equivalent Hearing. A written request with the same details as form 12153 may also be sent to the address found on IRS notice of federal tax lien

Make it clear in your request the reasons why you disagree with the filed lien or some alternatives to the lien. Some of these alternatives are:

  • You will enter into alternative payment options such as an installment agreement or Offer in Compromise
  • You will see to it that your spouse should be the one liable for the tax debts and then file for innocent spouse relief
  • You agree that there is amount due but you were not given the chance to dispute
  • Subordination or discharge of lien
  • Withdrawal of Notice of Federal Tax Lien

What Happens after you request a CDP or equivalent with the Office of Appeals?

The Office of Appeals will contact you to schedule a conference once they received your form or letter or request.

The initial conference usually requires a face-to-face meeting. After the first meeting, there will be one or more correspondence that is done in writing or orally.

At the end of the hearing, the Office of Appeals will provide a determination letter that is usually in your favor to release the lien. Most of the time the lien continues to exacerbate.

If you disagree with the determination of the Office of Appeals you can ask for a judicial review by the United States Tax Court. Make sure to make this petition within 30 days right after the Office of Appeals issue their determination letter. If you just let the days pass, you won’t be able to go to court and you won’t be able to question the Office of Appeal’s decision.

There are instances, however, that your appeal with the IRS is successful but the lien is still seen on your credit report. This means you should contact three of the major credit bureaus and ensure a copy of the release of the lien.

If your credit has suffered seriously and you have been broke because the IRS did not release your lien properly, it is almost  impossible to sue them and prove the case against the IRS.

Who Can Represent me in an appeal?

When appealing a tax lien through a Collection Due Process or Equivalent hearing the following people can represent you:

  • Yourself
  • Tax Attorney
  • Certified Public Accountant
  • Enrolled Agent
  • Member of Immediate Family
  • For a business: A full-time employee, General partner or bona-fide officers
  • Low-Income Tax Clinic (if you qualify)

It is highly recommended that you hire a qualified or trained tax professional to represent you. This will increase your success rate, instead of doing it alone. The IRS also prefers to deal with tax professionals than taxpayers because it will be less cumbersome for them to discuss it with people who are already familiar with the process.