Author: Kienitz Tax Law

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Stopping IRS Wage Garnishment

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One of the IRS’ most powerful tools to collect a tax debt is wage garnishment. Wage garnishment is the ability to take a portion of an employee’s wages directly from his or her paycheck. Wage garnishment is a very intrusive method of collection and several ways to deal with it are discussed below.

Background: Wage Garnishment Process

Before the IRS can begin taking money directly from a taxpayer’s paycheck, it must go through several steps. It generally begins with written notice to the taxpayer regarding the amount of the tax debt along with any penalties and interest. Assuming the taxpayer doesn’t take suitable action in response to this first letter, the IRS will send another written notice, explaining the intent to place garnish the taxpayer’s wages.

 

Assuming the taxpayer still does not adequately respond within a certain period of time (typically 30 days), the IRS will start garnishing the taxpayer’s wages. The IRS does not need to get a court judgment before garnishment can begin.

 

The IRS will then directly contact the taxpayer’s employer and force them to deduct a portion of the taxpayer’s paycheck and send it to the IRS. The amount the IRS can garnish depends on the size of the paycheck. The law does not limit how much the IRS can garnish, but rather, how much the IRS must leave behind in each paycheck for the taxpayer. The amount the IRS must leave will depend on the taxpayer’s filing status.

 

Stopping the IRS from Wage Garnishment

 

The following is a list of methods for stopping or stalling wage garnishment. None of the methods will actually make the entire tax debt go away, but will allow the taxpayer to pay the outstanding tax bill using another method or buy time before wage garnishment resumes. Also, all of the below methods require any back tax returns to be filed with the IRS.

 

Method #1:  Pay Off the Tax Debt

 

This method is idealistic, since the wage garnishment process probably wouldn’t have started if the taxpayer had enough money to pay his or her taxes. However, getting rid of the IRS debt, even if it means incurring interest charges by borrowing money, might be worth it for emotional well-being if nothing else.

 

Method #2: Apply for an Offer In Compromise

 

An offer in compromise is a means of paying off a tax debt for less than the full amount. Taxpayers must apply for an offer in compromise and it’s up to the IRS’ discretion whether to accept it. For more information, check out our earlier offer in compromise blog post.

 

Method #3: Set Up a Payment Plan

 

If a monthly installment agreement can be established where the tax debt can be paid off in three years or less, the IRS will usually agree to stop garnishing a taxpayer’s wages.

 

Method #4: Claim Financial Hardship

 

If the taxpayer can prove that the wage garnishment is creating a severe financial hardship, the garnishment can be halted until the taxpayer’s financial situation improves. The taxpayer will be required to show that the wage garnishment does not leave enough money for the taxpayer to pay for basic living expenses.

 

Method #5: Change Jobs

 

When a taxpayer changes jobs, the IRS eventually finds out, then goes through the process of contacting the new employer and re-establishing the wage garnishment. This can buy the taxpayer some time where his or her wages aren’t garnished, although it merely delays the inevitable.

 

Method #6: Declare Bankruptcy

 

This is an extreme option, given the financial repercussions to the taxpayer’s credit history and cost of filing for bankruptcy. Also, it won’t wipe out the tax debt, but it can stop the wage garnishment for a period of time.

 

Expert Advice Is Recommended

 

Deciding which method is best will depend on each taxpayer’s unique circumstances. Figuring out which option to use and how to use it will almost always require the advice of a qualified tax professional.

 

 

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Quarterly Estimated Tax Payments

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The United States has a pay-as-you-go system for the collection of income taxes. Most individuals see this concept in action automatically, when their employer withholds taxes from each paycheck. For those who are self-employed or receive a large cash payment from a one-time financial event, there is usually no automatic income tax withholding. But Uncle Sam doesn’t have to wait long to get his money because of the quarterly estimate tax payment requirement.

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Settling Back Taxes With an Offer In Compromise

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Imagine owing a tax debt so burdensome that you can’t see yourself ever being able to pay it. Wouldn’t it be nice if there was some way to write off some of your tax debt? Believe it or not, there’s something called an offer in compromise that allows taxpayers with back taxes to settle their tax debts with the IRS for less than the full amount. While not a magic reset button, the offer in compromise serves as a helpful tool for getting out from under the IRS’ thumb.

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IRS Tax Lien and Levy Basics: What You Should Know

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If the IRS believes a taxpayer owes a tax debt, the IRS will begin a series of steps to collect the unpaid taxes. The process will begin with notifying the taxpayer and working with them to get the taxes paid. However, if the taxpayer ignores the request or refuses to pay, the IRS has two very powerful tools for collecting the taxes, both of which are the subject of this blog post.

Tax Liens and Levies: What Are They?

A lien and levy are two different things. A tax lien is a security interest the IRS attaches to all of a taxpayer’s property in order to protect the ability to recover the tax debt. Not only does the tax lien attach to all of the taxpayer’s property at the time the lien is imposed, but also to any future property acquired by the taxpayer.

 

A tax levy is the actual taking of property, where property is seized by the IRS in order to help pay for an outstanding tax debt. Unlike a tax lien, a tax levy allows the IRS to not just “claim” property, but actually take it. This can be done in several ways, such as wage garnishment, withdrawal of money from the taxpayer’s bank account and the seizure and sale of physical assets. Despite its power, as long as the required tax procedures are followed, the IRS does not have to go to court to get a tax levy.

 

How Does a Tax Lien or Levy Occur?

 

A tax lien will usually be preceded by two steps. First, the IRS will notify the taxpayer of the unpaid tax debt. Second, the taxpayer will fail to fully pay the tax debt. When a tax lien is placed on property, it ordinarily will not come as a surprise to the taxpayer.

 

A tax levy will usually occur only after a tax lien has been placed on a taxpayer’s property. Once the lien is imposed and the taxpayer still has not paid the tax debt, the IRS will send several notices warning of a tax levy and provide an opportunity for the taxpayer to contest the tax levy at a hearing. If the tax debt is not paid, the IRS will issue the levy.

 

How Can a Tax Lien or Levy Be Removed?

 

A tax lien can be removed or dealt with in several ways:

 

  • Payment of the outstanding tax debt.
  • Obtain a Certificate of Discharge.
  • Subordinate the IRS lien such that other creditors will have a higher priority. This can make getting a loan much easier since it allows non-IRS creditors to gain access to property to secure a debt.
  • Obtain a Lien Notice Withdrawal.

 

A tax levy can be removed when the taxpayer does any of the following:

 

  • Pays the outstanding debt.
  • Demonstrates extreme financial hardship imposed by the levy.
  • Shows that the levy’s release will make it easier for the taxpayer to pay his or her taxes.
  • Enters into an Installment Agreement with the IRS which requires the IRS to remove the levy.
  • Shows that the property levied upon is worth more than the tax debt and the levy’s release will not jeopardize the IRS’ ability to collect the unpaid taxes.

 

In Summary

This blog is just a basic overview of the tax lien and levy process. Should a taxpayer have a tax lien or levy imposed, or receive notice of a potential tax lien or levy, it is highly advisable to seek professional help, such as the services of a tax attorney.

 

 

 

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Beware of IRS Telephone Scams!

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While the use of scams to defraud people of their money is an unfortunate constant in our society, the means of employing a confidence trick has evolved with the times. One of many scams that exists today involves a con artist pretending to be an employee of the IRS and telephoning his or her victim, tricking them into sending the con artist money. We briefly described this scam in an earlier blog post, but in this blog post, we will explore the IRS telephone scam in more detail.

Details of the IRS Telephone Scam

The actual scam specifics can vary, but the main idea is to scare or intimidate a victim into sending the caller money on the basis that the victim supposedly owes the IRS an unpaid tax debt. If the victim doesn’t immediately pay, the victim is threatened with arrest, deportation, property seizure and/or a lawsuit.

Apparently this scam works, with over $23 million paid out by thousands of victims since October of 2013. And those that don’t fall for the con get dangerously close to doing so. Here are some of the ways the telephone scam can appear legitimate:

  • The caller will identify him or herself as an IRS or US Treasury official. They will provide a name and may even provide a badge number.
  • During the call, the caller will play a white noise recording in the background in order to mimic the sound of a call center.
  • When the call is received, the victim’s caller ID will appear to show that the call is originating from the IRS.
  • If arrest is threatened, but the victim doesn’t agree to send immediate payment, a follow up call may be made from someone claiming to be from law enforcement. The victim’s caller ID will often appear to show that the call is originating from the local police department.
  • The telephone call may be preceded by an official-looking e-mail or letter claiming the recipient owes the IRS money.
  • The caller may have some basic personal information about the victim, such as the last four digits of his or her social security number.
  • The victim is sometimes provided with a real IRS mailing address in order to send certain paperwork.

Signs the Call Is a Scam

Luckily, there are many signs that the call is not legitimate. Some of these characteristics include:

  • The caller demands immediate payment. The IRS will not expect payment without first providing an opportunity for the taxpayer to contest the amount owed.
  • The call will be the first time the victim is made aware of money they allegedly owe. The IRS will always make first contact by mail.
  • The victim is asked to provide a specific payment method such as a prepaid debit card or a money transfer. The IRS will provide multiple methods of paying any money owed.
  • The caller asks for credit card information over the telephone. The IRS will never ask for payment information over the telephone.
  • The victim is threatened with arrest if they don’t pay.

What You Can Do

If you have received one of these types of calls, the safest thing you can do is hang up. You can also report the call to the Tax Inspector General for Tax Administration or the Federal Trade Commission.

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Watch Your Wallets!

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Government spending constantly goes up, no matter what politicians promise.

With so many government programs, pork barrel spending and earmarks, it’s no wonder this country’s debt continues to rise.  And exactly how does the government pay for all this? With taxes, whether creating new ones or increasing the rate of existing ones. The following blog discusses some of the strategies available that can help keep the government out of your wallet! Continue reading “Watch Your Wallets!” →

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ALERT: Tax Breaks for the Average Person

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Nobody likes paying taxes, but everyone likes being able to reduce the taxes they have to pay. There are several ways you can get a few tax breaks, whether it’s a tax deduction, tax credit or tax exemption. Even if you already utilize a few, you may still be asking yourself if you’re taking full advantage of what’s available. When you prepare your tax return, are there any tax breaks or secrets that you might be missing? The following article will discuss a few tax breaks available to almost anyone that you could be missing out on. Continue reading “ALERT: Tax Breaks for the Average Person” →