By Princess Clark-Wendel
Published May 03, 2011, FOXBusiness.com

April 18 has come and gone, but many taxpayers are facing a large tax bill that they aren’t able to pay. But there are steps they can take to work with the International Revenue Service to develop a payment plan.

After the IRS has made an assessment on what you owe, you have 10 days to pay it in full or be subject to collection action.

Although an account is technically considered delinquent after 10 days, no one will show up at your door on the eleventh day. A series of threatening notices will be mailed to you, and eventually you will be contacted in person by a revenue officer.

What Power Does the IRS Have?

Dealing with the IRS is different than dealing with other debt collectors. Unlike other creditors that have to go to court to obtain a judgment against you and then go back to court to have that judgment enforced, the IRS doesn’t. The agency is vested with the power to seize your property without a court order; the only requirement is that it has a valid assessment, give notice with a demand for payment (which has to be sent to your last known address) and give notice of intent to seize.

In addition to seizing your property, the IRS can also place a levy on your bank accounts and on your salary. This means that both your bank and your employer must turn over all funds being held for you to the extent of the levy. (Note: Special rules apply to levies against salary.)

Certain types of property are exempt by law from levy including:

1. Apparel and schoolbooks (expensive items of apparel such as furs are luxuries and are not exempt from levy);

2. Fuel, provisions, furniture, and personal effects, not to exceed $1,500 in value (for the head of household);

3. Books and tools used in your trade, business or profession, not to exceed $1,000 in value;

4. Unemployment benefits;

5. Undelivered mail;

6. Certain annuity and pension payments (including Social Security benefits);

7. Workers’ compensation;

8. Salary, wages or other income subject to a prior judgment for court ordered child support payments;

9. A minimum amount of wages, salary, and other income – $75 per week – plus an additional $25 for each legal dependent.

The IRS has been seizing personal residences more frequently in recent years. After a “notice of seizure” is placed on the front door of your house, you have 10 days to come up with the owed money, or there is an excellent chance your home will be sold at auction to satisfy the tax bill. You can redeem the house at any time within 180 days after the sale by paying the purchaser the amount paid for the property plus interest; by law, the purchaser must sell.

Act Now

The IRS cannot put you in jail because you owe money, even if the debt has been outstanding for years, unless you fraudulently conceal your assets or otherwise conspire to beat the government out of its money. No crime has been committed merely because you cannot afford to pay your taxes.

But don’t burry your head in the sand if you can’t pay your tax bill, respond immediately to all notices sent requesting payment and make every attempt to speak to someone at the IRS and follow up the conversation with a confirmation letter.

Depending upon your circumstances, the IRS may be willing to enter into an installment agreement for payment of the outstanding taxes. Usually, such a partial-payment agreement requires a down payment, followed by monthly payments over a year or 18 months. If you fail to comply with the terms of the partial-payments agreement, which also requires that all current taxes be paid on time, the agreement becomes void and your property is then subject to levy seizure.

The beginning of the collection process is the best time to try to get the IRS to offer you an installment agreement. If you have ignored the IRS’ attempts to work out an arrangement and you now have a “notice of seizure” on your door, it is extremely unlikely that the agency will create a partial payment agreement with you.

How to Negotiate with the IRS

The first step in negotiating a settlement of taxes owed is to provide the IRS with a current financial statement. Without a statement verifying your financial situation, the IRS will not even consider a settlement. If you don’t want the IRS to know about certain assets, don’t furnish the financial statement, it is better to offer no statement than offer one that is misleading or fraudulent.

If the IRS already knows about all of your assets, and there is no disadvantage in providing a financial statement, then go ahead and submit the statement. The IRS will be interested in knowing how much money you receive each month, and how and where it is being spent. When you complete the personal living expense portion of the form, it is generally a good idea to arrange for some money to be left over each month to pay taxes. The IRS is more inclined to go along with a partial payment offer if it feels confident there is money available to make the agreement work.

If you have no assets and no income, there is nothing the IRS can levy. If you are in this predicament, the agency does provide an opportunity to discuss an “offer in compromise,” which is a little publicized procedure where the IRS will accept a one-time payment of as little as 10 cents for each $1 owed.

If IRS officials think they will receive more money from you in the long run by entering into an offer in compromise than a collateral agreement, (an agreement whereby you agree to pay a certain percentage of your income for five to 10 years), it may agree to the compromise.

The best chance of successfully agreeing to an offer in compromise is when the tax debt has been on the books for a number of years. The IRS must be convinced that conventional collection procedures will not work, so don’t expect a relatively-recent tax obligation to be settled this way.

However, if the IRS has had a chance to collect and has not succeeded, it is likely to accept your compromise offer.

By Bonnie Lee
Published January 27, 201, FOXBusiness.com

From time to time every taxpayer will have to go head to toe with the IRS. Whether you are setting up an installment agreement, facing the auditor from hell, resolving a misunderstanding, or dealing with collectors on the phone or worse yet, on your doorstep, you would be well advised to heed the following suggestions.

1. You get more flies with honey. Dealing with bureaucracy can be very frustrating, but park your bad attitude and anger at the door. Take a deep breath, demonstrate a cooperative attitude, and proceed in an orderly fashion to resolving your issue. In my 28 years of dealing with the IRS, I have found that most IRS personnel are compassionate humans that bend over backward to find ways to resolve issues and help taxpayers. Of course you are going to run into that power-hungry, condescending, surly agent from time to time, but if you do, you can always trade up to a more understanding and respectful model by asking for the manager.

2.Use IRS lingo. When you use IRS lingo the agent you are speaking with will find you knowledgeable and may treat you with a little more respect. Here is some verbiage you may find useful:

Ask for penalties to be “abated” rather than removed. Tell them, if it’s the case, that your failure to (pay or file or comply with a document request) was due to “reasonable cause.” Use this term if you didn’t just flake and have a good reason, which could include such things as unemployment, losing your records, losing your home, health problems, etc.

If you can’t pay a tax bill because you are suffering financial reversals, you can ask to be deemed “currently not collectible.” If you are granted this status, they will leave you alone for an entire year while you get it together.

If you feel a spouse or former spouse should be responsible for a tax matter, ask to be treated as an “innocent spouse.” There are certain criteria to this status; do some research or discuss the issues with your tax pro.

If defending business deductions during an audit, the term “ordinary and necessary” business expense will help–but only if that’s really the case.

3. Don’t talk too much. IRS agents are trained to draw as much information from you as possible. Answer questions truthfully, but keep your answers short, succinct and to the point. There is no need to elaborate or discuss your personal life or disclose too much. This will only lead to misunderstandings and maybe even investigations.

4. Always tell the truth. Lies have a way of uncovering themselves. Once you are caught in a lie, you will always be suspect. And when you are suspect, you lose the cooperation you would normally receive. Don’t hide assets, don’t run for cover. There are many ways to resolve tax problems using a straightforward and honest approach. Lies may lead to jail time.

5. Only make promises you can keep. This is especially true when it comes to paying your liability. If an IRS agent asks you if you can pay $200 per month on a tax balance and you know you can only afford $100, tell him so. Indicate that you will try to pay extra when you can, but you are not going to set yourself up for failure by promising more than you are able. Throw that in with the fact, (if it’s the case), that you have always timely filed and paid liabilities in the past and now you need a break. Note that this will not work if their analysis of your financial situation indicates you can pay more.

6. Go to them before they come at you. If you are unable to keep a promise you make, tell the IRS immediately. The agency is usually so happy with the cooperation it will likely grant you the extensions you need. The collections department notes your file whenever you or your representative calls.

7. Stop the Interview. If at any time during an audit or a phone conversation you feel intimidated, disrespected, or out of your depth, simply say so and end the interview. Tell the IRS that you will be seeking representation and will get back with them soon. This will give you a chance to take a deep breath and discuss the matter with your tax pro. If you felt disrespected, you can always request a different auditor. Or if it was a matter of a surly customer service rep you were speaking with on the phone, you can hang up and call again in hopes of getting someone kinder or a little more understanding.

William Freudenthal owed the IRS some money. Quite a bit of money, actually – just over $16,000. And Freudenthal hadn’t been exactly timely about paying his tax obligation. He’d ignored notice after notice from the IRS. Finally, the IRS took action. They were going to seize some of Freudenthal’s assets – namely his classic 1965 Chevy Chevelle – to settle the debt.

This was not news that Freudenthal took well. His wife wasn’t exactly thrilled, either, and as you can imagine, the couple had an argument. Events escalated tragically, and Freudenthal struck his wife. The blow killed her.

Now, William Freudenthal is in prison. His wife is dead and his life is wrecked – and the real tragedy here is that the situation was completely avoidable. It didn’t have to end that way. Freudenthal, like every other American taxpayer, was entitled to the protections and procedures that are built into the tax code.

What is a Tax Levy?

A tax levy is the procedure the IRS uses to get money from taxpayers after they’ve exhausted every other avenue available to them. If you won’t voluntarily turn over the money to pay your tax obligation, the IRS will come and get it.

Let’s say you have some outstanding tax debt on the books – taxes that you were supposed to pay, but just didn’t, for whatever reason. The IRS will send you several notices, reminding you that you need to pay your taxes. If it remains unpaid, the IRS will eventually send you a Final Notice of Intent To Levy. This is your final warning to pay your taxes. If you don’t, the IRS is going to seize some of your assets to settle the debt.

What Type of Assets Can The IRS Seize?

The IRS has been given a great deal of latitude in their mission to collect revenue for the government. They can seize many different types of assets, including money from your bank account, real estate, vehicles, or personal property. The IRS can also garnish your paycheck, taking their share of your earnings before you even see it! This is known as a wage levy.

What Should You Do If You Receive A Final Notice of Intent To Levy From The IRS?

If you have received a Final Notice of Intent to Levy from the IRS, you have 30 days to respond. During those thirty days, the best thing you can do is find an expert tax problem solver. You are entitled to file a Collection Due Process Appeal in response to the Final Notice of Intent to Levy. However, it must be filed within 30 days of the date of the Final Notice. This appeal stops the IRS collections process and sends your case to the IRS Appeals Office. At that point, your tax accountant will work with the IRS to find a reasonable solution to your tax problems.

What If More Than 30 Days Have Gone By?

If it’s been more than 30 days since you received the Final Notice of Intent to Levy from the IRS, don’t despair! You still have options. With the assistance of your tax accountant, you can still file a Collection Due Process Appeal. At this point, the IRS collection efforts don’t stop automatically. However, your tax accountant will be working with the IRS to prevent the seizure of your assets.

If a levy has already happened, you still have options. A Collection Appeal, also known as a CAP, can be filed. In order to release the levy, you will have to meet certain conditions. Your tax accountant will let you know what these are, but they generally include filing any outstanding or unfiled tax returns, and submitting a Collection Information Statement along with a proposal of how you plan to resolve your outstanding tax debts. This could include an Installment Agreement, being placed as Currently Uncollectable Status, settling through an Offer In Compromise, or additional time to raise the funds to full pay the outstanding tax liabilities.

What Type of Resolution Can There Be For My Tax Problems?

The IRS has a single goal. They are mandated to collect as much tax revenue as possible, and they are becoming more diligent about this mission with every passing day. However, an experienced tax professional can often work with the IRS to find a resolution you can live with – and that stops the IRS from seizing your bank accounts, property, or classic cars!
Installment Agreements are a common resolution, as are Offers In Compromise to settle the tax debt for a fraction of the original amount owed. If you have to full pay your outstanding tax liabilities, a great tax problem solver will work to see if there is reasonable cause to abate any interest and penalties, which can save you thousands of dollars.

Solving Your Tax Problems

William Freudenthal learned the hard way that the one thing you don’t want to do in this situation is ignore the IRS. The IRS moves slowly, but it doesn’t stop – once they have you in their sights, they’re going to pursue you until the tax debt is settled. Having an expert tax problem solver on your side can help you get the debt resolved and the threats of levies and seizures behind you. Don’t lose everything. Get help for your tax problems!