Back Taxes Help Blog for State and IRS Tax Debt» bank levy

Why You Can’t Get Away With Not Paying Your Taxes

Manny Davis — Fri, 22 Jan 2010 13:55:48 +0000

With recent decreases in tax revenues the IRS is stepping up collection efforts more than ever, so you can be sure that the IRS will collect from you what is owed. The IRS has created an automated collection system that ensures that they will get what they want. Because of this system the IRS is known as the harshest (legal) debt collector in the United States.

Once the IRS gets wind of the fact that you failed to pay your taxes the their collection process starts. The IRS collection process is a very automated process and it is starts with being subtle about what is owed and will continue to get harsher and harsher until your taxes have been paid or enough assets have been seized to fulfill the outstanding tax liability. This collection process is very similar for most individuals but it can deviate course a bit depending upon your assets, financial situation, and past run ins with the IRS. Below are the standard steps the IRS collection system will follow.

Receive Series of Tax Assessment Letters: These letters will start off by simply stating what you owe in taxes and that you must pay. Each letter following the original will get a bit harsher in tone and a bit more threatening each time. Each time an IRS letter goes ignored you can expect the IRS to increase the severity of their next letter or action. Typically you will receive about 4 different letters that assess tax amounts owed before any actual action is taken by the IRS. These threatening letters will last for a period of 4-6 months before the IRS moves to their next collection tactic.
Receive an Notice of Federal Tax Lien: A tax lien gives the IRS legal claim to your assets in order to secure payment. This should not be taken lightly because it is very unlikely you will be able to get any company to lend you money since the IRS has first dibs on proceeds from your assets over other creditors. Many people do ignore the tax lien because it may not effect their everyday life, but if you continue to ignore it you can be assured the IRS will move to a harsher collection mechanism. (Sometimes this step can be skipped and the IRS moves right to #3 if they are dealing with a lot of money or think they are dealing with a very unresponsive taxpayer)
Receive notice of intent to levy: A tax levy is the final collection mechanism used by the IRS where they will forcefully seize your assets against your will. Once they issue a tax levy they have already labeled you as an unresponsive taxpayer and take collections into their own hands since you have failed to work with them to pay back the taxes. The IRS has several levy methods they use and they will choose the one that is easiest for them to collect taxes. The three forms of levy they will use are the following:
- Wage Levy: They will contact your employer and require that they withhold amounts from your paycheck in order to pay down the tax liability.
- Bank Levy: The IRS will contact your bank and require that they freeze funds in their in order for them to seize what funds are in there to satisfy the tax liability.
- Asset Seizure: The IRS will seize assets of yours and sell them in order to satisfy the outstanding tax liability.

As you can see the IRS will not stop until they get what is owed to them. Hiding from the IRS and trying to prevent them from getting the taxes owed is extremely difficult. If you cannot pay your taxes it is a good idea to work with the IRS and pay back the taxes you owe on your terms instead of on their terms.

Tax Services: Use a Large, Nationwide Firm or Small Local Firm?

Manny Davis — Tue, 01 Sep 2009 23:36:59 +0000

If you have tax problems and are looking for professional help it is important to find a reliable tax company to help. There are many companies out there that can help, large and small. Both large and small companies have their benefits. Depending on what you are looking for in a tax company and what your tax situation is should determine what type of company you should use.

Small tax firms are typically better for establishing a long standing relationship to file taxes and maintain accounting records. If you own a business and you need someone to help maintain your books and do normal tax filings that every business needs to make, it is a good idea to go with a local company since this will be an ongoing relationship. Even if you are looking for a professional to help with tax returns and general accounting a local tax firm would be the way to go. Small firms are not better for handling complex tax debt and back taxes issues. Small, local tax companies tend to focus on the normal tax filings and don’t have the manpower and expertise needed to efficiently and effectively handle the complex tax issues that are not seen as frequently.

Large tax firms that serve individuals nationwide have a great advantage over the small tax firms that tend to serve local communities. These large tax firms are able to achieve efficiencies on more complex tax issues. Many of the large firms will hire a variety of different tax professionals (Tax attorneys, CPAs, Enrolled Agents, CPAs & Ex IRS Agents) to handle complex tax issues such as unfiled tax returns, large amounts of tax debts, tax levies, tax liens etc on a daily basis. A tax professional that handles tax levies every day is going to be more efficient and effective than a tax professional that handles them occasionally. Most small firms only see these types of cases occasionally, so it would be a wiser choice to go with a large firm in these cases. Large firms are typically cheaper as well because they know how to navigate IRS issues quicker and more efficient, therefore billing out less total hours on your case. Below are some instances where it would be a good choice to hire a large tax firm that helps individuals nationwide:

Most people have an apprehension to using a large tax firm that they cannot sit down with directly because they are not local, they shouldn’t. Tax cases are slow moving and are all done by mail and email and there is no need to use a local firm. Everything can be done more efficiently over the phone and through email. Hiring a large nationwide tax firm is a great idea to resolve complex tax issues because you have all the best resources and professionals in one central location to help you with your problem.

Federal Tax Levy – Steps to Resolution With the IRS

Manny Davis — Mon, 29 Jun 2009 22:21:28 +0000

Every year, thousands of letters are sent out letting taxpayers know that the Internal Revenue Service means business. These letters (CP 90/CP 297) in consideration are often referred as an IRS Intent to Levy. A Federal Intent to Levy means that the IRS is going to try to recover or collect back taxes in a more coercive manner. This forceful collection method translates into the IRS either taking a good portion of your paycheck (referred to as Wage Garnishment) every month or seizing part of all of your bank account (bank account levy).

With regards to an IRS bank account levy, the IRS will typically seize whatever is needed for the repayment of your back taxes or unpaid taxes. They will begin by notifying your bank and having your bank hold or freeze funds for twenty-one days. After 21 days, your bank will send the funds to the Feds. Therefore, if you have received any type of notice from your bank or the IRS about your bank account being levied it is in your best interests to immediately deal with the situation before it is too late. You will need to pursue a Federal Tax Levy Release and it most cases, a professional knows the forms and procedures to follow.

With a Wage Levy or IRS Wage Garnishment, the IRS will send notice of their intention to taking a part of your paycheck to your employer. Your employer MUST comply with the IRS under Federal Law and make deductions from your wages as necessary. Strong professionals, like our firm’s partners, will in most cases be able to release wage garnishment in three to five days.

To release any levy, you or your professional will need to complete various forms. However, before anything is done you must be in compliance with the IRS. That means, that all tax returns that you have outstanding must be filed with the IRS before anything. Therefore, you need to know what years, if any, you did not file and make sure to complete the the necessary ax forms.

1) Contact the IRS to see if you are in compliance (make sure to not disclose financial accounts or bank accounts etc as again the IRS will take advantage of every opportunity to seize your funds). An advantage of a professional here is he or she can call the IRS and shield you from questions the IRS agents are trained to ask. Knowing the limits here is important.

2) If you are are not in compliance, file the appropriate tax returns or have your IRS professional do them. In order to further penalties and interest, fax those returns to to the IRS so you can immediately get into compliance with the IRS.

3) Once you are in “compliance” with the Internal Revenue Service the next step is to figure out a form of settling IRS taxes owed. Settlement can be paying less than you owe or just pertain to an IRS Payment Plan like an IRS Installment Agreement where you obtain an agreement with the IRS that you will pay them over time instead of all at once. Settlement mechanisms, where you pay less than you owe, can also be pursued depending on where you stand financially. These “settle for less” methods pertain to a Partial Payment Installment Agreement (PPIA), an Offer In Compromise, getting declared Uncollectible and so on.

4) In conjunction with Step 3 above, you will need to work with your tax professional or fill out form 433F (if your situation is being dealt with by the IRS Automated Collection System) or form 433A if you are dealing with a field agent. Form 433 is your Collection Information Statement. Form 433 will detailed all your assets, income, liabilities etc.

If you have been notified by the IRS, do something about it. It means the IRS has started their notorious automated process of collection and they will not subside until your back taxes are paid or you have an “agreement” of some type (discussed above) to repay them. If you have been informed by the IRS of a tax levy, have had your bank account garnished or your wages, start by signing up for a free tax analysis by using the “get quote” form on the right. Our partners will call you, diagnose your situation, make recommendations and let you know the cost of utilizing our services at no obligation or cost to you. Our services are structured so that our services only make sense financially – ie. we will save you more money and headache then if you tried to handle the situation on your own.