Category Archives: Tax Debt

Uh-Oh! The IRS is Riding the Debt Collector Train. Again!

Sooooooo, the IRS has recently announced (on September 26) that it plans to begin a private collection program (authorized by the Fixing America’s Surface Transportation Act) for certain overdue federal tax debts next spring and has selected four contractors to implement the new program.

A 1040 tax return with the word 'Overdue' stamped on it.

The IRS Has Hired Private Debt Collectors to Collect Back Tax Debt.

The IRS has attempted to use private contractors twice in the past, both times finding it not cost effective. Now, under the law, the IRS is required to use qualified contractors to collect inactive receivables. An inactive receivable is one that meets one of the following requirements:

  1. At any time after assessment, the Internal Revenue Service removes such receivable from the active inventory for lack of resources or inability to locate the taxpayer,
  2. More than 1/3 of the period of the applicable statute of limitation has lapsed and such receivable has not been assigned for collection to any employee of the Internal Revenue Service, or
  3. In the case of a receivable which has been assigned for collection, more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection of such receivable.

Certain receivables are not eligible for collection using private collectors. They include:

  • Those subject to a pending or active offer-in-compromise or installment agreement,
  • Those classified as an innocent spouse case,
  • Those involving a taxpayer identified by the IRS as being:
    1. Deceased,
    2. Under the age of 18,
    3. In a designated combat zone,
    4. A victim of tax-related identity theft,
    5. Currently under examination, litigation, criminal investigation, or levy,
    6. Subject to pending or active offers in compromise,
    7. Subject to a right of appeal, or
    8. In a presidentially declared disaster areas and requesting relief from collection,
  • those currently under examination, litigation, criminal investigation, or levy, or
  • those currently subject to a proper exercise of a right of appeal under this title.

The new program, authorized under a federal law enacted by Congress last December, enables these designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables. As a condition of receiving a contract, these agencies must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act. The IRS has selected the following contractors to carry out this program:

    • CBE Group 1309 Technology Pkwy Cedar Falls, IA 50613
    • Conserve 200 CrossKeys Office park Fairport, NY 14450
    • Performant 333 N Canyons Pkwy Livermore, CA 94551
    • Pioneer 325 Daniel Zenker Dr Horseheads, NY 14845

These private collection agencies will work on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts. Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases.

The IRS will give each taxpayer and their representative written notice that their account is being transferred to a private collection agency. The agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer. Private collection agencies will be able to identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect taxpayer rights.

The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment.

Private collection agencies will not ask for payment on a prepaid debit card. Taxpayers will be informed about electronic payment options for taxpayers on IRS.gov/Pay Your Tax Bill. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.

If you owe back taxes to the IRS, give Solid Tax Solutions a call (we are open year-round) at: (845) 344-1040.

We are also on the web at: SolidTaxSolutions.com.

__________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

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The IRS Has Proposed Increases in Installment Agreement Fees.

The IRS is proposing a revised schedule of user fees that would take effect on Jan. 1, 2017, and apply to any taxpayer who enters into an installment agreement.

The proposal, which is one of several user fee changes made this year, reflects the law that federal agencies are required to charge a user fee to recover the cost of providing certain services to the public that provides a special benefit to the recipient. Although some installment agreement fees are increasing, the IRS will continue providing reduced-fee or no-cost services to low-income taxpayers.

Installment Agreement Fees

The revised installment agreement fees of up to $225 would be higher for some taxpayers than those currently in effect, which can be up to $120. However, under the revised schedule any affected taxpayer could qualify for a reduced fee by making their request online using the Online Payment Agreement application on IRS.gov website. In addition, there would be no change to the current $43 rate that applies to the approximately one in three taxpayer requests that qualify under low-income guidelines. These guidelines, which change with family size, would enable a family of four with total income of around $60,000 or less to qualify for the lower fee. Also, for the first time, any taxpayer regardless of income would qualify for a new low $31 rate by requesting an installment agreement online and choosing to pay what they owe through direct debit.

The top rate of $225 applies to taxpayers who enter into an installment agreement in person, over the phone, by mail or by filing Form 9465 with the IRS. But a taxpayer who establishes an agreement in this manner can substantially cut the fee to just $107 by choosing to make their monthly payments by direct debit from their bank account.
Alternatively, a taxpayer who chooses to set up an installment agreement using the agency’s Online Payment Agreement application will pay a fee of $149. Similarly, they can cut this amount to just $31 by also choosing direct debit.

Proposed Fees

Here is the proposed schedule of user fees:

  • Regular installment agreement: $225
  • Regular direct debit installment agreement: $107
  • Online payment agreement: $149
  • Direct debit online payment agreement: $31
  • Restructured or reinstated installment agreement: $89
  • Low-income rate: $43

Further details on these proposed changes can be found in proposed regulations (REG-108792-16 in case you were wondering), now available in the Federal Register. The IRS welcomes comment on these changes, and a public hearing on the regulations will take place in Washington, D.C. For details on submitting comments, just take a look at the proposed regulations.

By law, federal agencies are required to charge a user fee to recover the cost of providing certain services to the public that confer a special benefit to the recipient. Installment agreements are an example of a service that confers a special benefit to eligible taxpayers. Agencies must review these fees every two years to determine whether they are recovering the costs of providing these services.

In the past, the IRS often charged less than the full cost for many services in an effort to make them accessible to a broader range of taxpayers. But given current constraints on agency resources, the IRS can no longer continue this practice in most cases.

Nevertheless, the IRS intends to continue providing reduced-fee or no-cost services to low-income taxpayers. For that reason, the IRS will continue subsidizing part of the cost of providing installment agreements to low-income taxpayers.

You can find out more information, on the IRS’ website, about the IRS User Fee Program.

If you are contemplating an Installment Agreement or have other issues regarding back taxes owed the IRS, give us a call at (845) 344-1040. We are here year-round to help you.

You can find out more about us on our website => SolidTaxSolutions.com.

__________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

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THE IRS MAY TAKE SOCIAL SECURITY BENEFITS TO SATISFY TAX DEBTS!

To satisfy tax debts, the IRS may levy a taxpayer’s Social Security benefits. However, a provision of the Internal Revenue Code requires the IRS to release levies that cause economic hardship.

An IRS Building.

Social Security Recipients Who Have Tax Debts May Receive a Visit From the IRS!

In addition, taxpayers have the right to claim an exemption against the levy, which allows them to receive a minimum amount of the Social Security payment and prevent all or part of the levy.

The Treasury Inspector General for Tax Administration (TIGTA) initiated an audit to determine whether the IRS appropriately applied manual levies to Social Security benefits. IRS Revenue officers make levy determinations of Social Security benefits on a case-by-case basis and exercise judgment in making the determination to levy. While there are special procedures and thresholds for levying Individual Retirement Accounts (IRA) and 401(k) retirement accounts, there are no special considerations or procedures for revenue officers when levying Social Security benefits. In these cases, the revenue officers follow procedures for levying assets in general. In most cases, revenue officers are compliant with these general IRS procedures when levying Social Security benefits. However, for 15 percent of the audit’s sample, TIGTA found that IRS revenue officers took levy action on Social Security recipients that likely caused or exacerbated economic hardship. These levies may be due in part to a change in collection policies that appears to give equal weight to nonlegal considerations (such as whether taxpayers are “cooperative” within the subjective determination of revenue officers) and the legal requirement to release the levy when the IRS determines that the levy is creating an economic hardship for the taxpayer. In these cases, revenue officers could have discerned from the facts that the taxpayers were experiencing economic hardship.

In Addition, while existing procedures allow revenue officers to manually levy up to 100 percent of Social Security benefits, taxpayers have the right to claim an exemption from the levy. However, in 28 percent of the sampled cases, IRS revenue officers used the wrong form to levy Social Security benefits. As a result, the IRS did not consider exemption amounts before establishing the levy. Of these cases, 6 percent involved taxpayers who suffered greater Social Security levies than allowed by law.

The TIGTA believes the IRS needs to adjust its policies and procedures to allow revenue officers, with appropriate discretion, not to levy if facts and circumstances clearly show that taxpayers are in or on the threshold of an economic hardship.

If you would like to see the complete report (ah yes, nice summertime reading), go to: www.treasury.gov/tigta/auditreports/2016reports/201630043fr.pdf.

Is this an example of to much force used by the IRS? Is it misguided?

__________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

A Notice of Federal Tax Lien, The IRS, and YOU!

After filing a Notice of Federal Tax Lien (NFTL), the IRS must notify the affected taxpayers in writing, at their last known address, within five business days of the NFTL filings.

Taxpayers’ rights to timely appeal the NFTL filings may be jeopardized if the IRS does not comply with this statutory requirement. The Treasury Inspector General for Tax Administration (TIGTA) reviewed a statistically valid sample of 133 NFTLs filed for the 12-month period beginning July 1, 2014 and ending June 30, 2015, and determined that the IRS timely and correctly mailed the copy of NFTL filing and appeal rights to the taxpayers’ last known address, as required by Code Section 6320(a). However, tests of a judgmental sample of 162 undelivered lien notices identified nine cases for which lien notices were not timely sent to the taxpayers’ last known addresses because the lien notices were sent to the taxpayers’ old addresses even though IRS systems reflected their new addresses. Among the nine, seven sampled lien notices were not sent to the secondary taxpayers’ last known addresses because employees did not identify separate addresses for taxpayers’ spouses. Both notices were instead sent to the primary taxpayers’ addresses. Although the IRS reissued lien notices for three of the cases upon receipt of the undelivered lien notices and subsequently reissued lien notices for the remaining six cases, all nine cases involve potential legal violations because the IRS did not meet its statutory requirement to timely send lien notices to the taxpayer’s last known address. IRS regulations require that taxpayer representatives be provided copies of all correspondence issued to the taxpayer. However, for six of the 37 sample cases for which the taxpayer had an authorized representative, the IRS did not notify the taxpayers’ representatives of the NFTL filings. TIGTA estimated that 22,866 taxpayers may have been adversely affected. In addition, for 17 of 162 judgmentally sampled undeliverable lien notices, employees did not update the mail status of the lien notice with the appropriate transaction code and action code combination.

If you would like to see the full report, go to www.treasury.gov/tigta/auditrepor ts/2016reports/201630047fr.pdf.

___________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

IF YOU ARE THE RECIPIENT OF AN IRS LEVY YOU NEED TO MOVE VERY, VERY, FAST!

Recently, I wrote an article on this blog giving an introduction to A Bank Levy (you can read that article here). After writing that article I ‘got to thinking’ about a court case that gives a real life application of the affect of a Bank Levy and how time can play a role in its operation.
Since Tax Season is in full swing I was not able to write about it sooner but I did not forget about you.

25209965s

So, this is a case which a California District Court heard in 2014 and is titled: United States of America v. JPMorgan Chase Bank NA (you can read the case here). If the decision in this case against JPMorgan Chase stands, banks may be more inclined to be lickety split when the IRS comes knocking with claims against a depositor’s money.

So to give you an overview of this case I will start with James Waterman who reported $21,584 of Adjusted Gross Income (AGI) on his 2008 tax return while claiming a refund of $78,169, which he received in August of 2009. Shortly thereafter, the IRS determined that Mr. Waterman actually owed $92,770.

Collection Officer Ted Hanson was assigned to the case. The Office of Chief Counsel gave Mr. Hanson authority to issue a Jeopardy Levy. There is potential for quite a bit of process when the IRS proposes to just take your stuff in order to satisfy a tax liability. A Jeopardy Levy, which is called for when there are indications that the taxpayer might be moving assets out of harm’s way, is quickly effective without the issuance of a notice informing the taxpayer of the right to a Collection Due Process (CDP) hearing, which can slow matters to a snail’s pace.

At around 9:30 AM on September 9, 2009, Mr. Hanson visited Mr. Waterman to demand payment of the amount owed. Mr. Waterman did not pay so Mr. Hanson served him with a series of documents, including a notice that IRS intended to levy his bank account.

A Race To The Bank!

Mr. Hanson then drove to the local Chase branch where Mr. Waterman had two accounts totaling $47,375.47. The jeopardy levy was served on one of Chase’s employees. Two hours later Mr. Waterman withdrew $40,000 from one of the accounts.

Chase was not in as much of a hurry as the other two players in the drama. Chase froze Mr. Waterman’s account two days later on September 11 and remitted the balance of $7,659.48, which included $0.32 of interest that had posted in the interim, to the IRS on October 1.

Who’s Responsible?

The thing about an IRS Levy is that if you are holding somebody’s property and you fail to turn it over to the IRS, the IRS can get it from you. So the IRS was looking for Chase to make up the $40,000 that left the account two hours after it had notice of the levy. Chase thinks that the IRS was being a little unreasonable and that IRS bears some of the blame.

It turns out that because this was a Jeopardy Levy, the collection officer was not required to explicitly give notice to Mr. Waterman that he intended to levy his bank accounts. Mr. Hanson, the Collection Officer, did so anyway, perhaps prompting Waterman to withdraw the money before Chase had time to freeze the account.

The District Court indicated that Mr. Hanson telling Mr. Waterman about the levy was improper. It went on to note that there are only two defenses to the levy.
One is that the entity being levied does not actually have anything that belongs to the taxpayer and the other is that there is a prior claim against the property.

Chase contended that it was entitled to a reasonable amount of time to react to the levy and that the IRS tipping Waterman off is what led to the loss. Chase’s argument did not go far with the judge.

“The fact of the matter, though, is that the IRS was required to tip Waterman off no matter what. Even when jeopardy assessments are made, the IRS must provide notice of demand for immediate payment before any levy may be imposed. 26 U.S.C. § 6331(a). While this notice does not necessarily inform the taxpayer that bank accounts will soon be levied, it certainly lets them know that something is afoot.

Moreover, Section 6332 does not contain any reasonableness element that would delay the vesting of the United States’ interest in property under a bank’s control.
The only requirement is that a bank “surrender any property … subject to levy” or risk being held liable for the disappearance of that property.
26 U.S.C. § 6332(d)(1). While it is true that the bank need not immediately “surrender” the property, it must upon being given notice preserve that property or run the risk of paying the depositor’s tax bill. That is the state of affairs here. Waterman’s money was “property … subject to levy,” the IRS agent served the bank with the levy giving it notice of the government’s claimed interest in the property, and Chase allowed it to slip away. Section 6332 is therefore applicable.”

So the Moral of the Story Is……..

An IRS Levy is No Joke!

Before it got to this stage, Mr. Waterman would have received several other notices from the IRS prior to the Jeopardy Levy and the visit by the IRS Collection Officer. A consultation with a competent tax professional would have avoided this horrid scene.

When you receive a notice (ANY notice) from the IRS (or the state) contact
SOLID TAX SOLUTIONS immediately at (845) 344-1040.

_________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

WHAT YOU SHOULD KNOW ABOUT A BANK LEVY!

Like a Ninja assassin, a bank levy strikes without a peep. How and when, no one knows. One day your debit/credit card will be working fine, but the next day your card will be rejected while making purchases or while trying to draw cash from the ATM. The IRS bank Levy can be quite devastating and can make normal life impossible; turning it upside down.

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A bank levy can be one of the harshest methods of collecting taxes used by the IRS. Should
you ever face a bank levy it shouldn’t come as a surprise because the IRS gives a fair warning to individuals in advance that they plan on using this method.


Bank levy – An Introduction

Bank levy is one of the easiest, quickest and the most preferred ways adopted by the IRS to levy you and get your attention fast. A bank levy is a situation wherein you have been informed that your account has been frozen and all or some portion of the money in your bank balance is taken away.
A bank levy is when the IRS literally and legally goes into your bank account and takes out a portion or all of your balance in order to make even for the unpaid taxes you owe to the IRS. When this happens, the bank has no say but to assist or accommodate the IRS. And if the bank refuses to do so, the IRS will personally hold the bank responsible for the funds that they were to receive if they were to levy your account.

Why and When Does Bank Levy Happen?

A bank levy is simply not levied just like that…impromptu. A bank levy can happen for a number of reasons, but the most common of them being, unpaid tax debt. Remember IRS does not want to levy, but has no choice. When the IRS finds out that you have not paid taxes to them, the IRS sends out series of four notices to the taxpayer (i.e., to inform you of their intentions to levy). In most of the cases, taxpayers do not respond. There are many reasons for it like the taxpayer has moved away or never got the IRS bank levy notices, or declines paying the amount due, etc. After sending out the fourth notice, the IRS sends out bank levy notices to the bank.

The Course of Action the IRS Takes for Bank Levy?

The bank levy process is actually the last straw of a long method of collection that the IRS follows. If the IRS wants to levy your bank account they must have assessed you with a tax amount to pay which you either must have not paid or entered into a payment agreement, and then were sent a final notice of intent to levy by the IRS. The IRS will literally and legally go into your bank and freeze your account(s). The balance in your account(s) will remain
frozen for 21 days until the IRS takes away the money you owe them.

Actions You Can Take to Stop or Avoid a Bank Levy

It isn’t an easy task to stop the IRS from taking away your money. If your account has already been frozen, you just can’t prevent the IRS from taking the money in your frozen account. However, you can adopt some common methods to get back into the good books of the IRS.

Installment Agreement: There are many methods of payments that have been offered by the IRS to pay off the taxes you have owed over the time. One of them being the Installment Agreement wherein you will pay the taxes owed in installments. After entering into an installment agreement, if you keep up on your promise, you will be in their good books and will not be levied, even though you may still have a large outstanding unpaid tax balance.

Offer in Compromise: Another method which the IRS rarely agrees to is Offer in Compromise. If you can show and prove that your living and financial conditions are so bad that there is no way you will ever be able to pay back the taxes you owe, the IRS will relent.

Uncollectible Status: If you prove your uncollectible status, the IRS may suspend their collection efforts and give you some time so that you can improve your financial situation enough and pay your taxes.

Appeal: You can file for an appeal within 30 days of receiving your final notice of intent to levy, before the levy has been issued by filing IRS form 12153. Filing for Collection Due Process (CDP), allows the taxpayer or their Power of Attorney to reach a final resolution with a settlement officer.

Though it it is difficult for you to deal with a IRS Levy, you do have a way out.

And that is by seeking the help of a competent tax professional before it is to late.

SOLID TAX SOLUTIONS can and will help you with your tax issues.

Call SOLID TAX SOLUTIONS at (845) 344-1040.

———————————————————————————————————————

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

Highways, Taxes, and Passports……….Oh My!

Are you planning a trip outside of the United States? Well, make sure that you go down your checklist to make sure that you have everything in place before you head off on that trip: Itineraries, tickets and reservation confirmations, cell phones and chargers, back taxes and your passport.

Whoa, wait a minute, Bruce. What were the last two on the list you ask? Back taxes and your passport? Eh?

Well since you’re wondering, there is a definite connection.

As I mentioned in my last post, President Obama recently signed into law (December 4, 2015) the Fixing America’s Surface Transportation Act, or the “FAST Act.” The purpose of the bill was to provide long-term funding for transportation projects, including new highways. But also stuffed into the bill were a few new tax laws: one (which I talked about in my last post), a requirement that the Internal Revenue Service (IRS) use private debt collection companies and another that requires the Department of State to deny a passport (or renewal of a passport) to a seriously delinquent taxpayer or revoke any passport previously issued to a seriously delinquent taxpayer. I will talk about the latter requirement in this post.

A Picture of Two United States Passports

So, to start with, the IRS has not been charged with revoking passports. That’s not within their scope of duties.The administration of passports has been and remains the responsibility of the Department of State.

Currently, the Secretary of State may refuse to issue or renew a passport for a number of reasons, including delinquent child support obligations. Procedurally, the names of noncustodial parents who owe more than $2,500 in back child support are submitted to the Department of State from an individual state; the Department will then deny the applicant a U.S. passport until the debt is satisfied. There was no similar rule which applied to delinquent federal taxes………………until now.

Under the new law, the Secretary of State is required to deny a passport or turn down the renewal of a passport to a seriously delinquent taxpayer. The Secretary of State is also permitted to revoke any passport previously issued to a seriously delinquent taxpayer. The new law also authorizes the Secretary of State to deny a passport if the passport applicant fails to provide a Social Security Number (SSN) or provides an incorrect or invalid SSN (but only if the wrong SSN was provided “willfully, intentionally, recklessly or negligently”). Exceptions are permitted for emergency or humanitarian circumstances, such as if there’s a need for the applicant to return to the United States.

So, what the heck is a “seriously delinquent debt” you ask? For purposes of the new law, a “seriously delinquent tax debt” is defined as “an unpaid, legally enforceable federal tax liability” when a debt greater than $50,000, including interest and penalties, has been assessed and a notice of lien or a notice of levy has been filed. The $50,000 threshold will be adjusted each year for inflation and cost of living – but overall, it’s a pretty low threshold. The limit is not a per year limit but a cumulative total: if you’ve ever owed money to the IRS, you know that with penalties and interest, the amount you owe can add up pretty quickly. The result? This has the potential to affect a lot of taxpayers. Fortunately though, exceptions will apply if the tax debt is subject to an Offer-in-Compromise (OIC) or an installment agreement or if collection action has been suspended because the taxpayer has requested a Collection Due Process (CDP) hearing or has made an application for innocent spouse relief. However, just how effective IRS will be in ensuring that taxpayers on the list aren’t subject to any of those exceptions remains to be seen.

Since the Department of State doesn’t have access to an individual’s tax records, how exactly will the Secretary know which taxpayers are subject to the new law? As with child support delinquencies, the names of the affected taxpayers have to be turned over. In this case, because of the way that privacy laws work, the Commissioner of Internal Revenue must certify to the Secretary of the Treasury a list of names that meet the criteria. The Secretary of the Treasury is then authorized to transmit that information to the Secretary of State. Any names on that list are ineligible for a passport. If your name is on the list, you will also be separately notified.

What if there’s a mistake? There is a provision for “reversal of certification” under the new law. The IRS is required to notify the Secretary of the Treasury who will then notify Secretary of State if the original certification was made in error or if the tax debt is fully satisfied or ceases to be “a seriously delinquent tax debt.” And because the potential for a lengthy reversal process exists, the law also provides a limited right to seek injunctive relief by a taxpayer who is wrongly certified.

Since disclosure and process are so important here, the new law insists that the IRS follow its normal examination and collection procedures and allow taxpayers the chance to exercise their full administrative rights. To alert taxpayers, there’s also a provision that additional notice of the potential loss of a passport is included in collections communications. So in theory, this is a good idea – but if you’ve ever received a letter from the IRS, you know that it’s very much full of notices. Most taxpayers can’t decipher all of the information and generally tend to ignore them. Hopefully, the additional notice requirements will be sufficient.

This isn’t the first time Congress has considered such a proposal. Two years ago, the House introduced a similar bill; it never got anywhere. But tucked away in the 1,301 page highway bill, it sailed through with virtually no amendments. The new law is effective immediately.

You can read the text of the law here (it downloads as a pdf). You’ll find the passport provision at Section 32101: Revocation Or Denial Of Passport In Case Of Certain Unpaid Taxes (it’s on page 1113).

If this new law will affect you, SOLID TAX SOLUTIONS can help. Just give us a call at
(845) 344 – 1040.

___________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Other Social Media Outlets: Facebook.com/SolidTaxSolutions (or just click on the icon on right sidebar of this page).

Website: SolidTaxSolutions.com (or just click on the icon on right sidebar of this page).

Back Taxes and Fixing Highways……Oh, What a Mix!

Well, well, well. Talk about strange bedfellows.

Recently, (December 4, 2015), President Obama signed into law the Fixing America’s Surface Transportation Act, or the “FAST Act”. It provides long-term funding for transportation projects, including new highways, over a period of ten years. And as you would expect in a bill targeting highways and infrastructure, it also requires the Internal Revenue Service (IRS) to use private debt collection companies.

Oh wait minute! You didn’t expect that? Well of course you didn’t. Because tax policy, in my opinion, has no business being jammed into an already extremely large bill of
1,301 pages mainly focused on highways
(here are all 1,301 pages of the FAST Act in case you are looking for a nice weekend read).
But that isn’t anything new for Congress. Is it?

But lo and behold there it is, at Section 32102 of the FAST Act: REFORM OF RULES
RELATING TO QUALIFIED TAX COLLECTION CONTRACTS
(I’ll save you a little
trouble; Section 32102 is on page 1,124 of 1,301. See the link in the prior paragraph).

So why “reform” you might ask? Under current law, the IRS already has the authority to use private debt collection companies to locate and contact taxpayers owing outstanding tax liabilities and to arrange payment of those taxes.
But historically, farming out collection hasn’t worked out to well for the IRS.

Under the new law, there’s little in the way of discretion: the IRS is required to use private debt collection companies to collect “inactive tax receivables.” Inactive tax receivables are defined as any tax debt that has been:

  • removed from the active inventory for lack of resources or inability to locate the taxpayer;
  • for which more than 1/3 of the applicable limitations period has lapsed and no IRS employee has been assigned to collect the receivable; or
  • for which, a receivable has been assigned for collection, but more than 365 days have passed without interaction with the taxpayer or a third-party for purposes of furthering the collection.

For purposes of the law, a tax receivable is any outstanding assessment which the IRS includes in potentially collectible inventory.

Debts which are not eligible for collections from private debt collection companies include those that are subject to a pending or active Offer-In-Compromise (OIC) or installment agreement as well as innocent spouse cases. Also excluded are cases currently under examination, litigation, criminal investigation, or levy and those subject to appeal as well as any taxpayer who has been identified as deceased, a minor under the age of 18, in a designated combat zone, or a victim of identity theft. The bill also allows for procedural discretion for matters involving taxpayers in presidentially declared disaster areas.

The language regarding disclosure is, of course, sufficiently vague. Private debt collection companies “may” – not must – identify themselves to taxpayers as IRS contractors, as well as the subject and reason for the contact. Disclosures are “permitted only in situations and under conditions approved by the Secretary.”

Ten Things That You Should Consider If You Owe Money to The IRS!

The IRS Restructuring and Reform Bill of 1998 was a landmark law that put respect for the individual taxpayer back into the system. It forces the IRS to more fully communicate with the public and grant taxpayers “due process” rights. When the IRS comes around to collect, sooner or later you’re going to have to face the music. If you play games with the tax collector, the system is designed to make your life miserable. So here are ten things to remember when you owe the IRS:

Top 10

Ten Things to Know if You (or Someone You Know) Owes Money to the IRS.

1. Don’t Ignore Any IRS Notices.

More people get into more trouble than they’ve ever bargained for because they ignore those computer-generated IRS notices. Some IRS notices are sent by certified mail. If you think you can ignore these notices by not going to the post office to pick them up, you’re mistaken. Respond to the IRS every time.

2. The IRS Must Explain Your Rights During an IRS Interview.

The IRS has recently revised its publication entitled “The IRS Collection Process.” This  publication tells you that you have a right to be represented and that you have a right to be treated in a professional and courteous manner. If you do not like the way you are being treated, you can stop the interview and ask to speak with a supervisor.

3. Before You Go To the IRS, Spend An Hour With a Tax Expert.

This may be the best hour you’ve spent in a long time. The tax expert will tell you how to prepare for your collection interview, how to conduct yourself and make you aware of when the IRS revenue officer is attempting to take advantage of you. You must always remember that the IRS revenue officer’s job is to collect money for the Government (See #4).

4. NEVER Meet the IRS Alone.

IRS collection interviews are no picnic and you should have representation. Chances are you will wind up with much better results with representation accompanying you.

5. The IRS Is Not Infallible.

The IRS was recently “audited” by the General Accounting Office and it seems that the IRS’ own house needs some cleaning. Often, the IRS cannot keep track of how much you owe, especially if you have been making regular payments. The IRS makes mistakes, don’t just take their word for things.

6. You Have Due Process.

The IRS can no longer simply take your bank account, your automobile, your business or  garnish your wages without giving you written notice and an opportunity to challenge what the IRS claims. When you challenge the IRS, all collection activity must come to a screeching halt. You can even take the IRS to court and they cannot collect from you until the judge issues a decision. You can literally tie the IRS’ hands for years. The IRS is not going to tell you what to do or how to protect yourself.

7. You May Be An Innocent Spouse.

Are you widowed, divorced or separated? Do you have tax problems that arose out of the actions of your former spouse? If you answered yes to any of these questions, you may be entitled to innocent spouse relief. This relief could result in the entire tax bill being written off against you. Yes, individual states also grant innocent spouse relief.

8. You Don’t Go To Jail If You Can’t Pay.

In this country, no one goes to jail for owing taxes. You can go to jail for cheating on your taxes and you can go to jail for trying to trick the tax collector, but you can’t go to jail simply because you owe the IRS and can’t pay.

9. You Have Options When You Owe The IRS.

People who owe taxes, whether to the IRS or their home state, generally have several options available to them. First, if you owe and can pay in full, you should pay the taxes despite the pain. However, if you cannot pay in full, four avenues may be open to you:

  • Hardship Suspension. Here the IRS leaves you alone temporarily. Your account will be reviewed periodically for your ability to pay. Even though the IRS will not bother you, interest continues to accrue on your account and is compounded daily.
  • Installment Payment Arrangement. Here the IRS allows you to make monthly installment payments. Ideally, the IRS wants the bill paid in full within three years.
    You complete a financial statement and essentially pursue a conventional bank loan. Interest continues to accrue and is compounded daily on the remaining balance.
  • Bankruptcy. It’s not for everyone. However, some taxes, usually income taxes, state and federal, may be dischargeable in a Chapter 7 bankruptcy proceeding.
    Other bankruptcy chapters allow you to pay your tax bill in monthly installments with either little or no interest at all. Bankruptcy rules are complicated. See a qualified bankruptcy attorney who understands both bankruptcy law and tax law.
  • Offer in Compromise. This is the IRS version of “let’s make a deal”. Under certain circumstances, the IRS will accept the payment of a smaller sum as payment in full for a larger tax debt. Individual states have similar procedures. If your offer is accepted, tax liens are removed and you are given a fresh start.
    You Should Consult With a Tax Professional Who Specializes in These Offers.

10. Respect the Power Of the Tax Collector.

IRS tax collectors have more power than just about anyone in the federal government. They operate under very few rules. They can make your life pleasant or miserable.
Most success in dealing with tax collectors comes from your communicating with them in a prompt manner. Here is a ‘taste’ of what they can do:

  • File a tax lien against you;
  • Levy your bank account;
  • Garnish your wages;
  • Close down your business;
  • Seize and sell your home;
  • Damage employment and business relationships;
  • Assess you personally for corporate employment taxes;
  • Put you in a monthly installment payment arrangement that is too high;
  • Contact your banker, neighbors, friends and business relationships concerning your tax liabilities;
  • Go after third-party transferees of your assets.

So, if you owe money to the IRS (or the state) or if you have received a notice from the IRS (or the state), give Solid Tax Solutions a call: (845) 344-1040. We will help you navigate this stressful and confusing process.

You can also find out more about us at our web site: SolidTaxSolutions.com

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Bruce – Your Host at The Tax Nook

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