Howard's IRS and the Law Blog

When the IRS gets you with a levy, bad things can happen – your wages are frozen and you are looking at living without a paycheck. The money you need to pay bills is suddenly swiped out of your bank account.

This presents an urgent dilemma requiring immediate relief.

So, what are the two quickest ways to get an IRS levy released with no questions asked?

1. Bankruptcy.

Although for some a course of last resort, bankruptcy results in an immediate release of an IRS levy, no questions asked. The filing of bankruptcy results in what is known as a “stay” on collection actions by all creditors, including the IRS. There is no need for disclosures or negotiations with the IRS for relief from a levy – it is automatic by bankruptcy law.

Read More

Turn on your television, listen to the radio, and it will be there: advertisements encouraging you to settle up with the IRS. Or watch the media, and you will see government agencies getting coverage for cracking down and closing some “pennies on the dollar” promoters for, well, over promoting the offer in compromise.

Before jumping in with an offer in compromise, consider the following realities:

1. The IRS does NOT have an open door policy to settlements. Year in and year out, the IRS publishes its offer acceptance rate. On average, the IRS accepts about 25% of the compromises it gets.

2. An offer in compromise is NOT a “pick up the phone and make an offer” type of thing. An offer in compromise entails a detailed written disclosure of your finances to the IRS – where you bank, work, your monthly living expenses and the value of your assets. If your offer is rejected (and remember, many are),, you have just spilled the beans.

Read More

Here is a practical question from a reader about a concern of everyday living – IRS seizure of your car to pay your tax debt.

If I own a free and clear vehicle that is ten years old and has 115k miles on it, and it is worth 4,000.  Will it be seized if the IRS does a levy and I have no other assets/income for them to take?

The IRS is rarely in the business of taking your car and preventing you from getting to work, the grocery store, or the doctor.  To have the IRS interested in a seizure of a vehicle, in most cases, you will have to be in a extreme position of noncooperation.  Good communication with a Revenue Officer lowers any risk of the IRS seizing your vehicle.

Read More

The time I spend helping my clients results in relationships that allows me to get to know them better.  I enjoy learning about my clients – many are small business owners, including everything from restaurateurs to electricians.  I represent doctors and lawyers and chief financial officers.  Some clients are retired on social security, and others are wage earners with a family.  It is all very diverse.

My clients have different backgrounds, different life experiences, and varying levels of education.

They have all found themselves – unintentionally – with IRS problems.

And they all are good people.

Read More

The Internal Revenue Code does not make it easy to understand how Federal tax liens work.  Hopefully, that is what I am here for.

The starting point to understanding your tax lien is to know that it lasts for the amount of time the IRS has to collect from you – 10 years.  After the 10 year statute of limitations on collections expires, the IRS is required to release the lien.  To accomplish this on a wide scale, the IRS inserts language into the lien that makes it “self-releasing.”  That means it is automatically released when the 10 years is up.

This “self-releasing” aspect of a tax lien is right on the face of the lien.  Here is what a Federal tax lien says:

“IMPORTANT RELEASE INFORMATION:  For each assessment listed below, unless the lien is refiled by the date given in column(e), this notice shall, on the day following such date, operate as a certificate of release as defined in IRC 6325(a).”

Grab your tax lien (I know it may be painful to look at). The top of the document will say “Notice of Federal Tax Lien.”  As an overview, in the center of the lien are six columns, identified with letters (a) through (f). Each column lists (a) the type of tax you owe, (b) the tax years, (c) the last four digits of your social security number, (d) the date the IRS put your balance due on its books, (e) the last day the IRS can refile the lien if it needs to, and (f) a balance due.

Note the balance due is not what you owe now; it is not current and does not reflect accrued interest, penalties or any payments you may have made.

Tax liens may contain a foreign language, but you can learn a lot if you know how to read them.  Let’s focus on the fourth column of the lien (column (d) ), and the fifth column (column (e).  They are the heart of the lien.

Column (d) provides the date the IRS made its assessment against you; in other words, the day the collection statute began.  Take the date in column (d) and add 10 years.  From the lien itself, we now have the date the IRS collection statute should expire.

As stated on the face of the lien, the lien itself operates as a certificate of release after the collection statute expires. Column (e) gives you that date, which is 30 days after the IRS collection statute expired. Hopefully, for you,the lien ends there, after 10 years.

But sometimes there’s a catch:  You may have done something that extended the time the IRS has to collect.  Did you submit an offer in compromise?  File bankruptcy?  Submit a collection due process appeal?  All of these extend the time the IRS has to collect.

In cases where the collection statute is longer than 10 years, the IRS can extend the life of the lien by refiling it to match the longer collection period.  This is where the 30 days comes into play.

If the IRS refiles the lien within 30 days of the collection statute expiration date, the lien remains in place and maintains its priority against all of your other creditors.

Example of lien refiling:  Let’s say you own a house, and it is worth $200,000. You have a mortgage, and you owe $100,000 on it.  The IRS has a tax lien filed, which attaches to all of the equity in your house.  You filed an offer in compromise with the IRS, which was rejected (don’t believe what you see on TV; most are).  It took the IRS 12 months to complete the offer investigation.  Your offer gave the IRS 12 more months to collect against you and the equity in your house.

The tension is that the IRS lien self-releases when the original 10 year collection statute expires, but they have 12 more months to pursue your house.  What happens?

If the IRS timely refiles the lien before the 30 days expires, the tax lien maintains its priority against your house and will remain in place for the additional 12 months you owe the IRS.

If the IRS does not refile the lien timely, the lien loses its priority against your house, although you still owe the IRS for an additional 12 months. Their claim is unsecured.  The point:  You could sell your house if the lien is not timely refiled, and the lien would not be paid at closing.  Or you could put a second mortgage on the house equity as the lien self-released and was not refiled to maintain its priority from the extended collection statute.

One more thing:  The IRS can still refile its lien late – after 30 days – but their priority is at risk for any intervening event.  Using the example above, presume the IRS was late and refiled the lien after 30 days.  Before the lien was refiled, you took out a second mortgage.  The tax lien would now be third in line, after your first and second mortgages. If the IRS is late on the refiling of the lien, the lien goes to the back of the class.

“How long does the IRS usually take to investigate an offer in compromise?” is a great question, and one I am often asked by clients.

The answer is six to twelve months, on average, although it can be longer, depending on the complexity of the case. If an appeal is necessary, add another six months.

But there is a flip side to the often frustrating amount of time it can take the IRS to investigate an offer in compromise.  The IRS does not have forever, and there are ramifications if the IRS takes too long to act on an offer.

If the IRS does not act within two years and notify you of a decision, the offer is automatically deemed accepted.

That’s right – done, at the amount you offered, courtesy of Internal Revenue Code 7122(f).

So, if your offer is sitting in year two of consideration and things are progressing slower than molasses, maybe you want to think twice about the urge to call the IRS and kick it into gear. (If you wait, bear in mind the statute of limitations on collection is tolled while the IRS considers an offer).

Here’s the small print:  The offer is considered accepted only if the IRS does not make a decision on it within two years after it is received.  “Decision” is defined to nclude the IRS rejecting the offer, returning the offer as not processable, withdrawal of the offer by you, or a failure to make payments under a periodic payment OIC.  If you have had any of these happen, the IRS has acted on the offer and made an decision. Time you spend in appeals from a rejected offer is not counted towards the two year time limit.

I have yet to have an offer accepted this way, although I have been close.  The IRS is more than aware of the timing limitations, and disciplinary considerations likely (and unfortunately) wait for the employee with the offer.  But if an offer is progressing slowly, it is important to know how to manage the clock and that too much time can work in your favor.

Page 10 of 32« First...89101112...2030...Last »