Category: IRS Levy and Wage Garnishment

IRS Collection Action, IRS Levy, IRS Tax Lien, IRS Audit

,

IRS collection action is down. There are fewer IRS audits, IRS levy and IRS Tax Lien filings. The IRS budget expenditures are lower and there is a reduced IRS workforce. While IRS collection action is down, taxpayer service and taxpayer rights are being jeopardized.  [See The 2017 IRS Data Book (released March 29, 2018) describing activities conducted by the IRS from Oct. 1, 2016, to Sept. 30, 2017].

Examinations and appeals – fewer audits:

Compared to the prior year, there were fewer IRS audits and IRS collection action is down (e.g., IRS levy, IRS Tax Lien filing) during fiscal year 2017.  The IRS audited almost 934,000 individual income tax returns during the fiscal year, the lowest number of audits since 2003. The chance of being audited fell to 0.6 percent, the lowest coverage rate since 2002.

Tax-related Identity theft – the fight continues:

In fiscal year 2017, the IRS also continued a years-long effort to fight tax-related identity theft. The IRS Criminal Investigation Division completed 524 criminal investiga­tions of tax-related identity thefts.

Changes in IRS enforcement activities – IRS Levy action down and fewer IRS Tax Lien filings:

IRS collection action fell during the fiscal year. IRS levy action was down 32 percent compared to the prior year, and the agency filed about 5 percent fewer IRS tax liens than in fiscal year 2016.

FY 2016

FY 2017
Number of offers received

63,000

62,000
Number of offers accepted

27,000

25,000
Number of federal tax liens filed

470,602

446,378
Number of notices of levy requested on 3rd parties:

869,196

590,249
Number of seizures

436

323

IRS budget and workforce levels when compared to fiscal year 2016 – down.

IRS’s actual expenditures were $11.5 billion for overall operations in Fiscal Year (FY) 2017, down from more than $11.7 billion in FY 2016

In FY 2017, the IRS used 76,832 full-time equivalent positions in conducting its work, a decrease of 14.9 percent from 2012.

The National Taxpayer Advocate also sheds some light on the current situation.

Taxpayer Services Reduced.

National Taxpayer Advocate Nina Olson, informed lawmakers recently that only about 4 in every 10 callers to IRS hotlines will be able to get through to a live operator to answer their tax questions during the fiscal 2018 filing season. The IRS plans to reduce telephone interactions with taxpayers and rely instead on more web-based services and tax practitioners. “Because of the IRS’s archaic telephone technology and operations, taxpayers face long wait times with the worry that the IRS’s telephone assistors will not be able to answer their questions if they are able to get through.”

Private Debt Collectors – a negative cash flow.

According to the Taxpayer Advocate, the use of Private Debt Collectors is not generating net revenues, appears to have been implemented inconsistently with the law, and burdens those taxpayers experiencing economic hardship. The Taxpayer advocate summarizes that according to the IRS, for Fiscal Year 2017, the Private Debt Collection program generated $6.7 million of payments from  taxpayers, but cost $20 million. At the same time, the IRS pays commissions to PCAs on payments from taxpayers that are attributable to IRS, rather than Private Debt Collector action.

Offer in Compromise Program – Still needs improvement.

The IRS continues to hold an exaggerated view of  taxpayer’s reasonable collection potential. This results in the IRS rejecting an Offer in Compromise which should have otherwise been accepted. The Offer in Compromise may be considered a potential alternative to IRS collection action.  However, an Offer in Compromise, absent special circumstances,  will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. This involves determining the taxpayer’s reasonable collection potential.

Citing a prior 2004 report, the Taxpayer Advocate advised that the IRS  is often overly optimistic in its view as to the collection potential from taxpayers with rejected offers.  Now, updated with the results of a current study,  the Taxpayer Advocate, advises that, “The IRS secures at least as much (often more) than the offered amount in 60 percent of the OICs it rejects. However, in the remaining 40 percent, the IRS has only collected a third of the amount offered through subsequent payments.  Overall, even after we factor in refunds offset to satisfy the delinquent liabilities, the IRS still collects significantly less than the amount offered on rejected or returned OICs” (emphasis added).

The Taxpayer Advocate, continued: “…when examining rejected OICs, the IRS determined reasonable collection potential was over 15 times the amount offered, and over 40 times the amount actually collected. While the rejection of the OIC is sometimes appropriate, in many instances, the IRS often has an exaggerated view of the taxpayer’s reasonable collection potential, with the dollars collected being less than the amount offered, and significantly less than the amount the IRS determined as the taxpayer’s reasonable collection potential.”

The Taxpayer Advocate recommended that the IRS should consider devoting more resources to obtaining acceptable OICs from taxpayers who seek to compromise their liabilities. See Offer in Compromise acceptance rate, and  IRS Offer in Compromise – will mine be accepted or rejected?

Reduced Training and reduction in competent advice and taxpayer services.

“The IRS has reduced its employee training budget by nearly 75 percent since fiscal year (FY) 2009. Not only has the budget for training drastically declined, but the way in which employees receive that training has shifted from in-person face-to-face training to virtual training. IRS employees cannot be expected to provide competent advice and adequate service to taxpayers who present myriad issues when they do not receive training timely or effectively. The downstream consequences to the IRS and taxpayers, including rework, misleading or incomplete advice, improper compliance actions, and distrust in the IRS serve to further degrade the relationship between the IRS and taxpayers, and violate the taxpayer rights to be informed, to quality service, and to a fair and just tax system. Employees must receive timely, comprehensive, and effective training in order to protect taxpayer rights and provide top quality service to taxpayers.” (Taxpayer Advocate Service – 2017 Annual Report to Congress).

For additional problems and recommendations, see the NATIONAL TAXPAYER ADVOCATE

Annual Report to Congress 2017.

 

 

IRS Collection Standards revised March 26, 2018

, , , ,

The IRS has issued revised National and Local standards (IRS Collection Standards) for calculating repayment of delinquent taxes. These revised IRS Collection Standards are effective March 26, 2018.

These “standards” are used by the IRS in cases requiring financial analysis to determine a taxpayer’s ability to pay on delinquent taxes. As such, they impact, installment agreements, Offers in Compromises, determinations of undue hardship, and collection matters.

Overview of Changes to IRS Collection Standards:

National Standards – Food, Clothing and  Other Items.

The revised Total allowances for Food, Housekeeping supplies, Apparel & Services, Personal Care Products & Services and Miscellaneous were increased by varying amounts for each Family Size category ranging from a .435 Percent increase to a 6.183 Percent increase. The Additional Person allowance (above 4 persons) was increased by 9.84 percent.

National Standards – Out of Pocket Health Care Expenses.

The Out of Pocket Health Care Expense Allowance was increased by 6.122 percent (from $49. to $52.) for the under age 65 category.

But, the allowance for the age 65 and older category was decreased by 2.56 percent (from $117. to $114.).

Local Standards – Transportation.

The Public transportation allowance was reduced from $189.  to  $178.

On the other hand, the Ownership Costs for one car and for two cars were each increased by 2.47 percent.

Operating Costs by region were revised, with some geographic regions having increased allowances while others were reduced.

Local Standards – Housing and Utilities.

          These standards were also revised by state and county.

IRS Collection Standards – Not in compliance with the law?

A substantive legal problem, apparently ignored by the IRS, continues to exist as to the IRS Collection Standards. The law mandates that the IRS collection standards are to provide for an adequate means to provide for basic living expenses.  In contrast, the IRS computation is based upon what people spend to live, not what goods or services actually cost to live.  Just because your family can’t afford to pay for a basic living expense, doesn’t mean that it is no longer a basic living expense. But, this is how the IRS determines its allowances.  The Taxpayer Advocate has continued to recommend that the IRS adopt proper standards. The IRS has not. See Your basic standard of living and determining “ability to pay”. Is the IRS not following the law? ; and providing for retirement is necessary for a family’s health and welfare). Also, IRS Collections continues to routinely “impose” these “standards” and ignores the legal requirement that they take into account a taxpayer’s particular facts and circumstances.

The Current IRS Collection Standards are referenced at this link.

 

STOP IRS Wage Garnishment - Economic Hardship

, ,

An IRS Wage Garnishment can be devastating. An individual’s wages, salary, and other income ( includes payment for personal services in a work relationship) can be levied. But, Economic hardship can stop an IRS Wage Garnishment.

IRC Section 6343(a)(1)(D) states that a levy shall be released if the Secretary has determined that “such levy  is creating an economic hardship due to the financial condition of the taxpayer”.  For example, the IRS wage garnishment is causing an economic hardship and preventing the taxpayer from paying necessary living expenses (rent, utilities, food, car payment, medical bills, etc…) for the taxpayer and family.

Unlike other levies, when the IRS levies your wages and salary, the levy is continuous. That means an IRS wage garnishment attaches to future payments, until the levy is released. Wages and salary include fees, bonuses, commissions, and similar type compensation. In comparison, a bank levy attaches only the monies in the account when the levy is served. It does not reach money deposited later.

A limited part of an individual taxpayer’s wages, salary, (including fees, bonuses, commissions and similar items) and other income, as well as retirement and benefit income, is exempt from levy.  When the IRS wage garnishment is served on the employer, the employer is to provide the employee with a statement that the taxpayer is to complete and return within 3 days. If not provided, then the exempt amount will be figured as if the taxpayer is married filing separate with one exemption.

When there is a joint liability, the IRS will generally not levy on both  incomes of husband and wife, except in flagrant cases of neglect or refusal to pay.  If the taxpayers are separated, then the IRS will consider collecting from both spouse’s income by serving an IRS wage garnishment on the employer of each.

By IRS policy, a levy attaches only to the taxpayer’s usual take home pay. However, voluntary deductions can be disallowed. For example, if the taxpayer has deductions for a savings account or to buy shares in a mutual fund, the IRS will require that those deductions be stopped so that the funds will be applied to the levy.

The IRS wage garnishment is not an installment agreement.  If you ignore the wage garnishment, other seizure actions may still take place.

ECONOMIC HARDSHIP CAN STOP WAGE GARNISHMENTS.

An IRS wage garnishment can be stopped by proving that you have an economic hardship.

IRM section 1.2.14.1.14 (Policy Statement 5-71) provides, in part:  “A hardship exists if the levy action prevents the taxpayer from meeting necessary living expenses. In each case a determination must be made as to whether the levy would result in actual hardship, as distinguished from mere inconvenience to the taxpayer.”

Generally a detailed financial statement will be required.  This process can become involved and complex  due to various factors. For example:

Not preparing the financial statement forms correctly.

A picture is worth a thousand words, and the financial statement is the portrait of your economic situation, and your particular facts and circumstances.  Most taxpayers simply do not fill these forms out properly because they may not recognize what factors are important to the IRS.

Statute of Limitations:

What if the Statute of Limitations is about to run out on the ability of the IRS to take collection actions (e.g., wage garnishment, bank levy, seizure, etc…)  as to an older year? In these situations, the IRS may become increasingly aggressive by demanding payments which the taxpayer truly can’t pay without suffering economic hardship.

Failure to meet deadlines

Taxpayers having a history of failing to comply with previously agreed deadlines for submitting financial statement information. This can result in a more aggressive administrative posturing by the IRS.

IRS National and Local Living Expense “Standards”

The IRS may very well seek to impose  its National and Local living expense standards when the facts and circumstances show that a deviation from such standards is necessary to avoid an actual hardship.  There are ongoing “issues” (problems) with the IRS position in these matters. For example, The Taxpayer Advocate issued its 2013 Annual report To Congress –  listing as  Most Serious Problem #7, that the IRS Continues to Levy on Taxpayers it Acknowledges are in Economic Hardship and then Fails to Release the Levies. Then,   as to your basic standard of living and determining “ability to pay”,  there is a fundamental issue as to whether the IRS is following the law.  And,  If you owe back taxes, then there is no retirement savings provision for you. The Taxpayer Advocate disagrees with such position.

Unfiled tax returns – and undue hardship 

Where there are unfiled returns, it is not only an abuse of discretion, but illegal for the IRS to proceed with an IRS levy where the levy is creating an economic hardship (see Vinatieri v. Commissioner of Internal Revenue, 133 T.C. 392 (2009).  However, your mere assertion of such status is not going to win the day.  It is important that taxpayers provide the required financial information, with supporting documentation, to substantiate economic hardship. Further, do not make frivolous arguments as they detract from the claim of economic hardship.

When you need assistance, call a tax lawyer with over 30 years of experience. 1-866-482-9767

Stop IRS Wage Garnishment. Economic Hardship

, , , , ,

Have a hardship?  Stop IRS wage garnishment.  By showing economic hardship you can reduce or stop IRS wage garnishment.  But, many times it is difficult to obtain a hardship determination from the IRS. For example, if you owe for a particular tax year for which the statute of limitations on collection is about to run (the IRS generally can collect on a tax debt for 10 years), IRS collection employees will seek to impose a minimum payment amount on you even if  you are  suffering from financial hardship.

The reason for this is that the IRS knows that in the near future,  it will be prohibited by law from getting payment.  In reality, the IRS will work in “reverse” and determine the amount they “need” to pay the debt before it expires. The IRS will then seek to impose that amount upon you.

IRM section 1.2.14.1.14 (Policy Statement 5-71) provides, in part:  “A hardship exists if the levy action prevents the taxpayer from meeting necessary living expenses. In each case a determination must be made as to whether the levy would result in actual hardship, as distinguished from mere inconvenience to the taxpayer.”

Generally, detailed financial statement analysis is needed in order obtain “undue hardship” status.  The fact is that in most cases taxpayers do not prepare the financial statement forms (e.g., Form 433-A, 433-F, etc…) properly. In many cases, important facts and circumstances are not provided by the taxpayer, because the IRS forms “didn’t ask for them”.  Moreover, proper legal argument and presentation of your particular facts and circumstances is critical in order to have the IRS stop wage garnishment and bank levy.

Another problem is that the IRS will use its Allowable Living Expense “standards”, and will seek to ignore your particular facts and circumstances, as required by law.

Obtaining “currently not collectible” status merely places your account on the IRS back burner. Interest and penalties continue to accrue, and the debt grows.  However, if you are suffering from undue hardship, then you need such relief. Additionally, such may, in appropriate cases, be a planning opportunity to have the statute of limitations run on a particular tax year and have the tax debt “go away”.

When you need IRS wage garnishment and levy release assistance, please contact  IRSLevyRelief.com  – toll free 1-866-482-97

 

 

 

 

IRS Levy - Innocent Spouse Relief

Innocent Spouse Relief Attorney Services

Married taxpayers will many times file joint tax returns with their spouse in order to obtain tax benefits. For example, a lower tax rate. However, in doing so, each spouse becomes jointly and individually liable for any tax shown owing on the return (including, penalties and interest) and any additional taxes, penalties and interest resulting from an audit. This would include the situation where only one spouse was responsible for the underreported income or improper deduction. Even in that case, both spouses are jointly and individually liable. The good news is that you may qualify for innocent spouse relief.

In order to see if you qualify for innocent spouse relief, you should consult with an innocent spouse relief lawyer.  Located in California, innocent spouse relief attorney services are provided to taxpayers nationwide. In these cases, it is important that the facts surrounding the tax liability are obtained and then framed by innocent spouse relief legal counsel in the best possible legal  posture. This involves analysis of the facts and integrating such with legal authorities and citations.

In a typical innocent spouse case, the husband is self-employed. The husband didn’t report all of his income on the joint return. The wife didn’t know about the unreported income and didn’t benefit from it.  A separation and divorce takes place. The IRS conducts an audit, discovers the unreported income, and assesses additional taxes, interest and penalties.  But now, the “husband” can’t be found or may not have the ability to pay. The IRS is seeking payment for the liability and goes after the easiest target, in this case the “wife”. In other situations, one spouse may have died and the surviving spouse only learns of the tax problems after his or her spouse’s death.

There are different types of innocent spouse relief available. They include:

Innocent spouse relief.

Separation of liability.

Equitable relief.

Contact me at www.IRSLevyRelief.com to see if you qualify for relief.

Toll Free:  1-866-482-9767

IRS Urges Travelers Requiring Passports to Pay Their Back Taxes or Enter into Payment Agreements; People Owing $51,000 or More Covered

WASHINGTON ─ The Internal Revenue Service today strongly encouraged taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.

This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. See Notice 2018-1. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.

Taxpayers affected by this law are those with a seriously delinquent tax debt. A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.

There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:

• Paying the tax debt in full
• Paying the tax debt timely under an approved installment agreement,
• Paying the tax debt timely under an accepted offer in compromise,
• Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
• Having requested or have a pending collection due process appeal with a levy, or
• Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

A passport won’t be at risk under this program for any taxpayer:

• Who is in bankruptcy
• Who is identified by the IRS as a victim of tax-related identity theft
• Whose account the IRS has determined is currently not collectible due to hardship
• Who is located within a federally declared disaster area
• Who has a request pending with the IRS for an installment agreement
• Who has a pending offer in compromise with the IRS
• Who has an IRS accepted adjustment that will satisfy the debt in full…

If you need assistance with your tax problems, please call 1-866-482-9767. The consultation is free.
Please visit my web sites: www.IRSLevyRelief.com.