Tag Archives: tax levy

Have IRS Tax Debt? Need a New Passport? The GAO wants to know.

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As of the end of fiscal 2010, the balance of reported unpaid federal taxes was about $330 billion according to the IRS. This is a huge amount and as we have written about in the past, the enforcement of the tax laws and the tax code is on Government Accountability Office’s list of high-risk areas.  The deficit being what it is it may come as no surprise that the GAO was asked to investigate, by cross referencing unpaid federal taxes and passport issuance, the magnitude of known unpaid federal taxes for individuals who were issued passports.  Selecting a past year, the GAO did a study for the fiscal year 2008 to identify examples of passport recipients who had known unpaid federal taxes.

They study discovered that individual states issued passports to about 16 million individuals during fiscal year 2008 and that of these, over 224,000 individuals (over 1 percent) owed more than $5.8 billion in unpaid federal taxes. That is JUST those individuals who got new passports in 2008 – not all passport holders.

Does that come as a surprise? Currently each state is not authorized to restrict the issuance of a passport to an individual because they owe federal taxes. In addition, federal law does not permit the IRS to disclose taxpayer information, including unpaid federal taxes to State officials unless the taxpayer consents. The reason this is at least somewhat surprising is that in contrast, federal law does permit certain other restrictions on the issuance of passports to individuals, such as for those individuals owing child support debts over $2,500.

Really, the problem is likely far greater than 1% of the newly issued passport holding population.  In addition to the obvious population balance of all valid passport holders for the studied year of 2008, the estimated amount of unpaid federal taxes was actually likely understated because it excluded individuals who had not yet filed tax returns or who had underreported income.

Making matters harder, individual States currently cannot compel a passport applicant to provide a Social Security Number (SSN). Because the IRS uses the SSN to identify each taxpayer, without an SSN you cannot match an individual back to their IRS data.

This study had produced such alarming results already and the GAO wanted to know a bit more. They took the 2008 study and dug deeper into the backgrounds of a very small group of just 25 passport recipients. Clearly this is a tiny study and cannot be reflective of the population as a whole. That said, some pretty interesting things were discovered.  When investigating for abuse related to the federal tax system or criminal activity, of these 25 cases, at least 10 passport recipients had been indicted or convicted of federal laws! In addition, the IRS had assessed trust fund recovery penalties on several passport recipients; a penalty which is applied when an individual does not remit payroll taxes to the federal government.  How does someone fall behind on Payroll taxes?  Instead of acting appropriately as the trustee of an individual employee’s withholding and forwarding it onto IRS, they divert the money for other purposes. Using payroll taxes is a big crime; in fact the willful failure to remit payroll taxes is a felony underU.S.law.

In this smaller study of the 2008, of those 25 new passport holders, some had accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, all while failing to pay their federal taxes. In fact, of the 25, at least 16 passport recipients traveled outside the country all while owing federal taxes and another 4 passport recipients actually resided in another country at the time! Worse yet, two individuals used the identities of deceased people to fraudulently obtain passports in the first place and then used the passports to travel toMexico,France, and Africa. Ironically in one case, the unpaid tax debt belonged to a deceased individual and in the other; the debt was actually incurred by the imposter.

If this small study is any indication, there appears to be a big opportunity to crack down on passport issuance for those who owe federal tax debt. Although nothing official has been implemented to date, Congress could pursue policy to link federal tax debt collection and passport issuance by enabling States to screen and prevent individuals who owe federal taxes from receiving passports.  This would require transparency and more communication between the IRS and the individual States, but it seems that the opportunity to collect unpaid tax debt would be greatly improved as a result.

 

If you have an unresolved tax debt, visit us today at www.professionaltaxresolution.com for more information about our customized tax settlement assistance. The CPAs and tax professionals at Professional Tax Resolution use their extensive knowledge of the tax code to provide taxpayers with the best settlement option available. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to learn more about our services and to receive a free, no obligation consultation.

IRS Tax Debt Who Has it? Tax Lien Statistics Give Some Clues

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Feel like you are the only one with a tax debt problem? Ever wonder where in the US more people have the tax debt issues? Is this a problem of the rich or is the problem of incurring Tax Debt affecting everyone?
A recent 2010-2011 analysis of tax liens from across the U.S. found that New York City, which happens to have some of the wealthiest neighborhoods in the nation, was actually the country’s leading geographic area for federal tax liens. According to the data,New York City accounts for nine, or 18 percent, of the top 50 U.S. zip codes with the most liens recorded over the past 12 months ending in September.

Is this a problem of the rich of New York trying to skirt their fare share payments to the IRS? The economy has hit everyone so perhaps this is not the full story. Taking a harder look, four of theNew York City zip codes include some of Manhattan’s most affluent neighborhoods, including the Upper West Side (10025 and 10023), Chelsea(10011), and Murray Hill (10016), but the remaining five New York City zip codes are in more typically minority and working-class areas of Brooklyn, Queens, and the Bronx. To really understand how much richer these neighborhoods are, if you break down the differences in the New York Zip Code demographics by using recent U.S. Census data, those Manhattan’s four zip code tax debtors earned a whopping 250 percent more than those in the city’s less affluent areas. Of course with more income, comes the potential for bigger tax burden and the average IRS debt of Manhattan’s wealthier tax debtors is much higher than the amount owed by their working-class neighbors. It turns out the tax debt of the wealthy NYC zip codes averages $58,592 or about 86 times more than the boroughs. So, while the rich owe a lot more per capita the problem of owing tax debt in the NYC area is affecting both the rich and working class.

What about the rest of the country? Virtually all of the remaining nationwide zip codes in the top 50 are located in minority and economically depressed neighborhoods. Perhaps not coincidentally six of these neighborhoods are in areas hit hard by the economy including Las Vegas, Washington, D.C., and Detroit all of which have high unemployment, short sales and foreclosures which can lead to high levels of tax debt.

All that said, New Yorkhas been a high ranking tax debtors location for some time but this may be due to population density. Taking a second analysis of prior year nationwide tax liens, this time from July 2009 to July 2010, reveals that at that time New York City accounted for 16, or 32 percent, of the top 50 U.S. zip codes with the most tax liens and six of those New York zip codes were located in Manhattan.

Why did the NYC area drop in 2010-2011 to just 18 percent from a 2009-2010 amount of 32 percent? Seems the nationwide recession has caused more working-class Americans to lack the means to pay their tax debts. The problem is more widespread, so perhaps the number of individuals affected in New York is simply a smaller percentage to the growing nationwide issue.

If you are in need of tax settlement help, probably the most important decision you will make is the selection of a qualified tax professional. The CPAs and Enrolled Agents at Professional Tax Resolution have many years of experience providing tax settlement help. We encourage our customers to check our memberships, reviews and affiliations for verification of our credentials and our past successes. For more information about the tax settlement services we can provide, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation

 

Tax Lien and Tax Levy Facts – The Expert Advice You Need

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What is a Tax Lien?
A tax lien is a claim against one or more of a taxpayer’s assets. It is issued by the IRS or State Tax Agency for the purpose of insuring payment of a tax debt. The tax lien gives the issuing tax agency priority over other potential creditors with respect to the assets identified by the lien. A tax lien is one of the more aggressive steps in the enforced collection process and is usually issued when all other previous attempts to collect a tax debt have been ignored.

How Does a Tax Lien Differ From a Tax Levy?
While the tax lien is a claim against a taxpayer’s property, a levy is the actual seizure of that property. The levy is one of the final steps in the enforced collection process and is used only when a taxpayer has made no attempt to resolve an existing tax liability. Once a Final Notice of Intent to Levy has been issued together with an official notice informing the taxpayer of their right to a formal hearing, the property identified by the levy can be confiscated without further notification.

Under What Conditions Can a Tax Lien Be Withdrawn?
A tax lien can be withdrawn if it was not filed according to established IRS policies and procedures or if it will delay the collection of the tax debt in question. It can also be withdrawn if the taxpayer enters into an installment agreement to repay the debt identified by the lien or if it can be established that withdrawing the lien is in the best interest of the taxpayer.

When is a Tax Lien Released?
A tax lien is released when the tax debt identified by the lien is paid in full. It will also be released if the taxpayer enters into a formal agreement with the issuing tax agency for partial payment of the existing liability. These resolution options include, but are not limited to, an Offer in Compromise or a Partial Payment Installment Agreement. Once the tax debt is paid in full or one of the partial payment settlement plans has been accepted, the taxpayer must submit a formal written request that the lien be removed. Within 30 days of receiving such a request, IRS will issue a Certificate of Release.

What are the Recent Changes to Tax Lien Guidelines?
• The threshold for issuing a tax lien has been raised from $5,000 to $10,000.
• A lien will now be released once a taxpayer has entered into a direct debit installment agreement but after a probationary period to insure that the direct debit agreement is in place and working as planned.
• The qualifying criteria for an Offer in Compromise have been revised to include a larger group of taxpayers. The tax debt ceiling has been raised from $25,000 to $50,000 and the maximum annual income allowed has been increased to $100,000.

If you are the subject of a tax lien or any other type of collection activity by the IRS or State Tax Agency, our experienced professionals can help you stop the action and resolve the tax debt issue that caused it. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation

Tax Levy – Understanding and Resolving IRS and State Tax Levies

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Do you have or know someone with a tax levy? A tax levy is serious, it is the actual seizure of a taxpayer’s property by either the IRS or a State Tax Agency. It is one of the final steps in the enforced collection process and is usually exercised only after all previous attempts to collect a tax debt have failed.

A tax levy is different from a tax lien. The lien simply gives the issuing tax agency priority over other creditors with respect to the identified property while the levy actually results in the confiscation of the property.

The IRS must officially warn a taxpayer before assets are seized to satisfy an existing tax debt. The first official notice to go out is the Notice of Tax Due and Demand for Payment. If the delinquent taxpayer fails to respond to this notice, it will be followed by the Final Notice of Intent to Levy together with an official notice informing the taxpayer of their right to a hearing. Once this official communication process has been completed, the IRS can seize the identified assets without further notification.

With certain exceptions, the IRS can levy any physical asset held by a taxpayer. They can also levy retirement accounts, bank accounts, dividends, wages, insurance policies and numerous other assets that may be the property of the taxpayer but held by someone else. One notable exception to the list of assets that are subject to the levy process is the taxpayer’s principal residence. The taxpayer’s residence can never be seized to satisfy a tax debt of $5000 or less and can only be confiscated to cover a debt in excess of $5000 with written approval of the federal district court judge or magistrate. In addition, property (other than rental property) that is used as a residence by another person cannot be seized to satisfy a tax liability of less than $5000. Similarly, real or tangible property used in a taxpayer’s trade or business cannot be levied without written approval of an IRS director. Other categories of physical property exempt from an IRS levy include wearing apparel, school books and furniture and personal effects up to a fixed dollar amount. Certain types of payments are also exempt. This list includes workers’ compensation, unemployment benefits, some annuity and pension payments, certain types of Social Security, disability and welfare payments, judgments in support of minor children and certain amounts of wages and other income.

The IRS is a very powerful collection agency and an IRS Levy is one of its most aggressive actions. A taxpayer who receives and IRS Notice of Tax Due and Demand for Payment or an IRS Notice of Intent to Levy should realize that enforced collection action is imminent. At this point, the most effective response is probably to enlist the help of a qualified tax resolution specialist. An individual who understands tax law and has experience working with the IRS may be able to stop impending collection activity. There is also the chance that a tax professional will be able to reduce the tax liability that resulted in the collection action or eliminate it altogether.

If you are the target of a tax levy or any other type of aggressive collection activity by the IRS or State Tax Agency, our experienced tax professionals can help you forestall the action and resolve the tax debt issue that caused it. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

How We Reduced One Client’s Tax Debt from $40,000 to less than $1,000

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We were hired by the owner of a small mortgage company to resolve his tax debt. Our client had received a notice that his wages from a related company had been garnished by the state tax board and the federal government had issued an IRS notice of the intent to pursue a tax levy and tax lien. Both the state and the IRS were taking serious action and the client was understandably worried. At the time of the initial meeting the state tax board had already collected approximately $3,000 through wage garnishment which of course was a huge financial burden for his family.

What had gone wrong? The owner of the company admitted that he had actually not filed either his corporate or individual tax returns for five years. Why not? With the downturn in the economy, the company had lost money during that time and the owner figured it was not necessary to file his tax returns because he had made no profit.

Had he received any IRS Notices? Not only was the answer yes, he brought us a large stack of completely unopened IRS Notices and letters from the IRS. At Professional Tax Resolution Inc., we see this all too often. Clients paralyzed by fear have piles of unopened IRS Notices and Letters from the IRS. Why do you get so many letters? The reason is actually more logical than it may appear; the IRS generally has a 10 year statute of limitations for most tax debts so as an outstanding tax debt approaches the 10 year mark, the IRS collection efforts usually get more and more aggressive.

The first thing we did after our client hired us was determine which prior year tax returns had been not filed. We then did background research about beneficial tax codes so that when we filed his missed year returns, we could take all of the applicable benefits for our client. We know from our years of experience that the process of filing unfiled returns or correcting prior year returns is not only the right thing to do, it is far more productive than attempting to negotiate a settlement with the IRS for an amount less than the reported amount of the tax owed.

It turns out in the case of our mortgage company client, the IRS and state tax board had prepared estimated returns based on 1099 Forms provided to them by other taxpayers. When the IRS or State tax agency prepares an estimated or substitute return, they only include information that they have on file which traditionally only includes the income reported to them. The result is that all allowable expenses are generally not taken.

In this case we were able to contact the Internal Revenue Service and State Tax Board and obtain a 30 day collection hold to allow us the time we needed to file all of the outstanding returns. Using IRS transcripts, account information and our client’s company expense records we were able to actually prepare and file all of the outstanding individual and corporate tax returns. Once that work was completed and the returns were properly prepared, we ran a calculation and saw that the actual amount owed was now under $1,000! This was a huge reduction compared to the more than $40,000 the IRS and state tax boards indicated was owed just weeks before. We faxed the revised state tax returns to the state tax board and were able to stop the wage garnishments immediately and our client even receive a refund of the amounts the state had previously garnished!

We achieved great success in this case, reducing our client’s liability by over 97% because we correctly filed his outstanding returns. Had our client asked for advice years before, he might never had to face the burden of his large tax debt. Had he opened his IRS notices and called us for help earlier, he might have avoided a wage garnishment and tax lien. The lesson learned is simply that the worst course of action is no action at all.

For more information about how we can help you; call us at (949) 596-4143 and speak directly with a CPA today.