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Tax Relief: The IRS Can Seize Your Retirement Accounts

May 28, 2010 By

Creditors can’t meddle with your retirement accounts. This account category is seen as a saving and therefore protected. However, there is one creditor that many of us overlook. The IRS is the most powerful creditor of all and they have the legal power to seize retirement accounts if necessary. These accounts incorporate Keogh plans, 401K plans, self-employed plans and IRAs. The Internal Revenue Code does not forbid seizure of such assets.

It is your responsibility to ensure your retirement accounts are kept safe from IRS seizure. The best way to prevent seizure is to know the IRS can acquire what you acquire – no more and no less. If you make it impossible for you to touch the retirement cash, the IRS won’t either. It is common to gain access to the funds at the severance of employment service, death / disability and retirement. While you have employment you may not use that money and the IRS has no power to seize it. The Internal Revenue Manual 5.11.6.2 oversees the IRS seizure of retirement accounts.

There are important considerations should retirement money be available to you and within reach of the IRS. Firstly, were you responsible for flagrant behavior resulting in legal responsibility? Examples of flagrant behavior would be contributing to the account as unpaid taxes were expected, fraud and evasion of tax. Secondly, do you rely on cash from your retirement account now or in the future? The Internal Revenue Manual 5.11.6.2 maintains a retirement account may not be levied if there is no evidence of flagrant conduct or reliance on retirement cash.

There is no doubt that correct management, negotiations and awareness is necessary in defending your retirement cash from the IRS. If there are no rights to the retirement account even hostile IRS Revenue Officers will relent. Should you refuse to withdraw the cash the IRS will attempt to place a levy on salary. Even though the IRS has the power to seize they prefer not to.

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Tax Relief: Get Rid of Pride before You Fall

May 27, 2010 By

Even the best entrepreneurs need to see past their pride in order to understand how risky it is to function in a climate of tax trouble. The IRS shows no mercy to such businesses and they also incriminate business owners and management. There are indications that all is not well regarding tax issues in a business.

Every business owner and self-employed individual is responsible for filing and paying their income taxes. Even though workers possess a means for keeping back tax money; business owners mostly do not. A shortage of cash from the business negatively influences the capacity to pay living costs that are personal. The consequence is that essentials like mortgage interest and groceries get paid and the IRS does not. This delay means the IRS has the right to petition your home. There is no use in paying your mortgage if you leave it vulnerable to seizure because you don’t make quarterly tax payments.

A business may not use retirement cash to take care of personal living expenses. Creditors who are paid with this money have no right to it. Retirement cash is regarded as an asset and is beyond the grasp of creditors with the exception of the IRS.

Prior to a business dipping into retirement cash the credit cards are used up. By now the business is already in trouble due to credit card debt that is out of control. Refrain from taking retirement cash to cover the cards. In fact, paying the IRS is more essential than paying the cards. If need be, bankruptcy will remove credit card debt. The IRS will not overlook the non-payment of taxes.

If a business owner uses employee tax withholding money to cover creditors the business will fall deeper and deeper into tax debt due to penalties and added interest. Both the owner and management will be held liable for taxes that are not paid. The IRS will attempt to get tax money from the owner’s and management’s private assets.

A business that can’t make tax payments must still file. If you don’t, you are delaying the inevitable. The IRS has a tracking method for returns not filed particularly in the case of employment tax. Non-filing will get the interest of the IRS and a designated Revenue Officer. It is preferable to truthfully keep the IRS informed of the troubles your business experiences rather than allowing pride to stop you.

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Tax Relief: Uncle Sam’s Gaze Shifts to Non-filers With Mortgages

May 26, 2010 By

The Internal Revenue Service made it known they could choose to make use of mortgage interest payments to recognize tax payers who did not file returns. If you did not file, are self employed and did not give an account to the Internal Revenue Service but paid mortgage interest because you own a home, then you have an income. According to the Internal Revenue Service this is proved because you have the means to pay a mortgage. If the Internal Revenue Service does not have evidence you filed a return they assume your tax returns are missing and your income is unreported.

The opinion of a tax expert was the Internal Revenue Service was displaying aggression towards the cash economy. In essence, the Internal Revenue Service was getting at tax payers who are self-employed entrepreneurs who were unable to file tax returns. The reasons for not filing returns were out of their control and consisted of business malfunctions, divorce and medical troubles. These are issues that do not fit into any exact category. It is possible for mortgage interest to be covered by a non-taxable cause. Examples would be living from existing finances through a period without work and the refinancing of a property. However, studies have shown there are individuals who have income and cover mortgages but do not file tax returns.

If you have not filed returns it is advisable to willingly make contact with the Internal Revenue Service before they approach you. The Internal Revenue Service regarding non-filing as a suggestion of tax fraud. They want a return and an indication you want to settle your tax issues. This can be done by bankruptcy, offer in compromise uncollectible or repayment agreement. There is no better means of pacifying the Internal Revenue Service than by avoiding non-filing and finding a way to rectify nonpayment.

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Tax Relief: Automated Levy & Manual Levy – What’s the Difference?

May 25, 2010 By

Automated Tax Levy (15%)

The IRS may take an automatic 15% from social security benefits every month. If the IRS can correspond the government’s Financial Management Service with its delinquent taxes records to show the right to social security it can go ahead. Once an association is proven the tax payer is provided with an IRS notice of the beginning of a 15% levy on social security. A notice of confirmation is supplied by the Financial Management Service when the levy comes into practice.

The most commonly used of IRS collection utensils is the automated social security tax levy. The IRS gets an outcome that is simple, proven and immediate. For the tax payer it is responsible for the greatest adversity. Automated levies on social security benefits resulted in 1.74 million payments to the IRS in 2007. It was anticipated 86 % of the levies came from circumstances where social security was the main or sole income for the tax payer.

Manual Tax Levy (100%)

The IRS can take more than 15% of the social security to a tax payer. A manual tax levy can keep on taking all social security benefits according to the Internal Revenue Code section 6331 (a). The code allows levy on salary, wages and other income plus social security. The automatic levy of 15 % is an extra to the manual levy.

It is when there is no cooperation from a tax payer that a manual tax levy is chosen. This levy must be allocated to an IRS Revenue Officer. The automatic levy is a procedure that eliminates the use of paperwork.

Exemptions on a Manual Tax Levy

A tax payer may claim an exception against the manual levy even if the IRS can levy a maximum of 100% of social security. An exception allows the tax payer to get a minimum of a social security payment and thereby bringing down all or some of the manual tax levy. $779.17 can be claimed from a manual tax levy by a single tax payer receiving social security every month. This results in the IRS getting amounts higher than $779.17. The IRS has adopted a more lenient stance in situations of financial privation. It must be proved that automated and manual levies don’t allow for living expenses.

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Tax Relief: Recognizing a Tax Lien from a Tax Levy

May 24, 2010 By

The IRS collects taxes by tax lien and tax levy. You must identify and understand how the IRS files a lien and issues a levy.

Tax Lien

For the IRS to safeguard rights to your property they file a tax lien. The lien affixes to property you possess when filed and property you buy thereafter. Real estate is influenced by Federal tax lien. The lien provides the IRS with a stake in your property the same as a mortgage company.

If your property’s value is $100,000 and your mortgage is $75,000 your equity is $25,000. Prior to the filing of an IRS tax lien the $25,000 would be yours. After the filing of the lien, the $25,000 is the property of the IRS. Should you sell your property, equity at close of sale goes to the IRS.

Should the IRS file a lien there is thirty days for an appeal. It is a collection due process appeal. At time of expiry of the IRS Statute of Limitations on Collection, the lien also expires. It usually takes ten years.

Tax Levy

When the IRS wants your property, a levy is issued. Your retirement accounts, wages, accounts receivable, bank accounts and subcontractor pay can be levied. Vehicles and homes can be seized and less frequently business apparatus. The levy is more damaging than the lien. Code 6334 provides exceptions like tools of your trade, unemployment benefits, household goods and workers’ compensation.

If the IRS anticipates opposing you they must provide you with a Final Notice of Intent to Levy prior to a levy on your property. You have thirty days to lodge an appeal against the IRS’ intention. When you appeal, the IRS may not act against you until the hearing is finalized. The objective is to arrive at a decision to levy action prior to it taking place in the form of uncollectible, offer in compromise or installment agreement.

The Department of Justice must file a lawsuit opposing you before the IRS can take / seize your property. Government’s inclination is to avoid this action.

The IRS gets differing rights against you depending on a lien or a levy. A lien secures your property for the IRS and a levy seizes it. However, both benefit the IRS. You can defend a lien and prevent a levy.

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Tax Relief: Avoid Dragging Out IRS Statute of Limitations

May 21, 2010 By

The IRS is permitted ten years to bring in a debt. You must make tax choices that are advantageous as a collection statute is nears expiry. Your options are as follows:

Collection Due Process Appeal

An IRS Final Notice of Intent to Levy is a collection due process hearing. It lengthens the time period the IRS has to bring in money owed during the time you are awaiting your hearing. To get this benefit, you must reply to a Final Notice of Intent to Levy within the given time. The Collection Statute will not be lengthened if a late-filed collection due process application is distinct as filed in a single year of the time of the Final Notice. It will allow you to a petitions ‘comparable’ hearing. IRC 6330(e), IRM 5.1.9.3.6 and Treas. Reg. 301.6330-1 (g) (3), ex 1 provides legal information.

Innocent Spouse Relief

When the filing of the innocent spouse relief request is filed, collection is delayed until a petitioning period of ninety days to the Tax Court ends. If such a petition is reported for on top of an IRS refusal then the time is lengthened until a verdict from the Tax Court in approximately sixty days. This information is found in IRC 6015(e) and IRM 25.15.1.8

Offer in Compromise

The Statute of Limitations on Collection is lengthened by approximately thirty days when filing an offer in compromise. It can take from six o twelve months for an IRS examination. You are permitted two years to settle. The proposal for an offer may not be your best option.

Installment Agreements

You may petition if the IRS denies or ends an installment agreement. A petition will lengthen the time of collection. IRC 6331 (k) (2) (d) provides information.

Taxpayer Assistance Order (911)

If the only solution is a Taxpayer Assistance Order to block the IRS then filing a Form 911 delays the Statute of Limitations on Collection throughout the anticipated evaluation.

Bankruptcy

Bankruptcy lengthens the Statute of Limitations on Collection by an extra six months. It gives the IRS added time to gather non-discharged taxes if you didn’t get rid of all tax responsibilities. This is explained in IRC 6503 (h) and IRM 5.9.4.2

It is important you ascertain the likelihood for acceptance is more than the threat of lengthening the time for collection because it will only extend your tax troubles.

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Tax Relief: It’s No Party When an IRS Revenue Officer Calls

May 20, 2010 By

No taxpayer wants an unexpected visit from the IRS. Collection employees sent by the IRS are known to be highly experienced and worldly enough to take on cases that involve big money. These are cases that are specifically recognized as being noteworthy to the IRS. Special attention is allocated to repeat offenders, non-filers, businesses and employment tax liabilities. The purpose of the Revenue Officer is restricted to a local area not far from your business or home. These Officers are ‘field agents’ and have to leave the office and go into the environment of those chosen as special cases.

There is no doubt that if you have been handed over to a Revenue Officer of the IRS you will be paid a visit and it will be a surprise visit to either your business or home. It has been noted that most surprise visits take place on prior to holiday weekends and also on Fridays. The IRS Officer will leave behind a calling card in the case of you being away. The calling card will ask you to get in touch with the IRS by a specific date. In the event you do not act in accordance with the request, the Revenue Officer can summon you to an office of the IRS.

A Revenue Officer will proceed to get your receivables, wages, bank accounts and retirement accounts should you not willingly work with the IRS. In addition, a Revenue Officer has the power to take control of business apparatus and vehicles. However, this is a final alternative if the case in question is critical. It is important to bear in mind the objective of a Revenue Officer is to make a decision in order to shut a file. In order to do this it may take an installment agreement, offer in compromise or your case being declared uncontrollable. Your particular finances determine the outcome and it helps to cooperate as much as you can.

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Tax Relief: Say No More – Uncle Sam Is Perfect

May 19, 2010 By

It’s not unheard of for the IRS to let a taxpayer know a tax return was not received. This includes innocent spouse claims, tax returns and collection appeals. It happens because there are times when the IRS misplaces mail. To be fair, it does not happen on a large scale but it does happen. However, according to the IRS if they didn’t receive a tax return then it’s your fault. Their stance is: you did not file. If you believe the IRS is in the wrong then you will have to prove it. Your word is not enough.

When it comes to the IRS prevention is far better than cure. It is very difficult to convince them of any error on their part. One way of making certain your tax return reaches them is to hand-file. This means you must take your tax return, request or appeal to the IRS walk-in center. Make sure you also have a copy of all documentation. Insist the IRS date stamps the copy when the original is filed. Do not mail all returns in one envelope. Place each return it its own envelope. This is to stop all going missing at one time.

Another area where Uncle Sam is infallible is time periods. If the IRS disputes the delivery date of an appeal they expect undeniable evidence to prove you are in the right. The dispute will come from an Appeals Officer or other Revenue Officer. Only an IRS date stamp on a copy will convince them you made the appeal in time. To safeguard yourself you must only hand-file collection due process appeals.

If you must use a post office, request a receipt as proof of mailing. However, this is not the end of IRS disputes. They have been known to dispute the contents of an envelope. According to them a receipt only shows an envelope was mailed but not what the envelope contained. This is not a reasonable approach but if you can’t prove you are in the right then the IRS will not accept your word without obvious proof.

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Tax Relief: Can Bankruptcy Overcome an IRS Audit?

May 18, 2010 By

There are negative consequences of bankruptcy that last a number of years.  However, there are certain situations when bankruptcy is the better option.  One of the benefits of opting for bankruptcy is to gain the right to an automatic stay.  The automatic stay prevents creditors from making any contact with you in order to request the money you owe.  You won’t even get a phone call.  This stay action is also applicable to the Internal Revenue Service.  The second you go ahead and file for bankruptcy all your creditors and the Internal Revenue Service are legally obliged to back off.

It is with great relief tax payers discovers an automatic stay has the power to release a levy with immediate effect in the case of bankruptcy.  This brings enormous peace of mind if you are in a precarious financial situation.  However, even an automatic stay can’t hinder an Internal Revenue Service audit.  Bankruptcy has no influence over Internal Revenue Service audits and can’t prevent them from being carried out as is confirmed by the Bankruptcy Code section 362(b) (9).

The reason bankruptcy is such a compelling instrument in working out Internal Revenue Service difficulties is because it does away with penalties, interest and taxes owed by you at the end of an Internal Revenue Service audit.  There are certain conditions that do apply.  For example, you must file for bankruptcy at the right time.  240 days must pass after the completion of an Internal Revenue Service audit to bankrupt the audit outcome.

Audits as carried out by the Internal Revenue Service is extremely meticulous and a means of them discovering your exact tax position.  It is true you may not have the means to prevent such a process from taking place but if you file for bankruptcy it will eradicate any tax damage

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Tax Relief: Who Has More Power – IRS or Credit Card Companies?

May 17, 2010 By

The sooner you take action the sooner you can resolve your finance issues. Remember, if you don’t do something it will only get worse. It would be accurate to point out that many Americans don’t know what to do. Even the most basic knowledge is better than none at all.

When it comes to being indebted to credit card companies and the IRS there are two issues you should know about. Credit card companies use their influence and tactics to make you think they have an enormous amount of power over the individual. However, in comparison to the very real power of the IRS, credit card companies use much less clout.

Once your card application is approved you get a statement once a month. The companies include what you spent, how much you owe, minimum monthly payment and interest fees. You must make your minimum monthly payment by a certain date. If you miss the date you pay more interest. If you don’t pay you get reminders, letters of demand and phone calls. If you still don’t pay your account is handed to a debt collector and more pressure is applied.

Credit card companies’ tactics are hard-line when compared to the IRS’. Once your tax return is filed, the IRS provides you with a number of notices and then eases off. You probably will continue to get a statement once every year. It is not the policy of the IRS to send out a statement every month. They only do so if you have an installment agreement. They hardly ever phone to ask for payment.

A credit card company is obliged to file a lawsuit against you before getting into your bank accounts or salary. Their lawyer must notify you of a court action. The majority of cases are not taken to court. However, the IRS can levy your wages and bank accounts once they send notices of collection. They aren’t obliged to file a lawsuit, phone or send monthly statements. All that is necessary is a Final Notice of Intent to Levy.

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