Category: Tax Tips

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Tax Prep Guide

Tax season is about to start, which means it’s that time of year where you need to be on the lookout for tax documents such as W-2s and 1099s. But what other documents and information do you need to have ready to complete your tax return over the next few months? That precise answer depends on your unique tax situation, but the following guide will provide a good overview of what you might need to have ready when you or your tax preparer files your tax return this year.

Continue reading “Tax Prep Guide”

telephone tax scam

Tax Scam Trends

Those who have read Lewis Carroll’s, Through the Looking Glass, may recall the Red Queen. This character explains to Alice that she must run as fast as she can merely to stay in one place. This is the origin of the Red Queen Hypothesis, which theorizes that living things adapt and evolve, not to gain an evolutionary advantage, but to survive. In other words, evolution doesn’t improve a species’ chances of survival, but prevents it from going extinct. Continue reading “Tax Scam Trends”

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IRS Tax Audits

One of the things that keep many of us from going too far in our attempts to reduce what we owe Uncle Sam is the fear of a tax audit. In most situations, the audit process isn’t as scary as most people fear, especially if there is nothing to hide. The following blog post will provide an overview of the audit process and explain certain steps you can take to reduce the chances of being an audit victim. Continue reading “IRS Tax Audits”

Prevent Your Tax Information from Being Used for Identity Theft

Prevent Your Tax Information from Being Used for Identity Theft

The information required to prepare and file taxes is substantial. On an individual return, a full name, social security number, address and phone number are typically required. Then there are supporting documents that are either included with the return or are used to prepare the return. These include W-2 Forms, 1099 Forms and any other relevant documents, such as donation receipts. Continue reading “Prevent Your Tax Information from Being Used for Identity Theft”

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IRS Tax Payment Plan Overview

If you’re behind on your taxes, it’s only a matter of time before the IRS sends a letter informing you of your tax debt and the additional money you own in interest and penalties. But for most taxpayers, it’s impossible to pay off their tax debt quickly. After all, if they had the cash to pay off their tax debt, their tax debt probably wouldn’t exist in the first place. Continue reading “IRS Tax Payment Plan Overview”

Kienitz Tax Law

The Difference Between an IRS Tax Lien and Levy

Having an IRS tax lien or levy imposed is one of the scariest situations a taxpayer can encounter. This fear is completely understandable given the immense power of the IRS. The good news is that the IRS won’t impose a tax lien or levy without first exhausting other collection methods. This means a taxpayer will usually have plenty of notice before things get so bad that the IRS will enact a tax lien or.  However, if you are unfortunate enough to be subject to a tax lien or levy, below is some basic information about IRS tax liens and levies that may help figure out what to do next.

What Is an IRS Tax Lien?

A tax lien is a legal claim the IRS places on a taxpayer’s property as a result of an unpaid tax debt. This legal claim will attach to basically all of the taxpayer’s present and future acquired property, including bank accounts, real estate and personal belongings.

This legal claim, also called a security interest, can create problems for the taxpayer. First, it can severely damage the taxpayer’s credit since any credit checks will reveal the tax lien and make it very difficult to obtain credit, such as a mortgage or personal loan.

Second, the tax lien will effectively make the taxpayer’s property the IRS’ property. This means if the taxpayer sells something that has an IRS tax lien on it, the cash proceeds belong to the IRS, not the taxpayer. This situation will exist until the tax delinquency is resolved.

 

What Is an IRS Tax Levy?

A tax lien is considered to be more “serious” than a lien. This is because the tax levy will result in the IRS taking the property, not just having a legal claim to it. The IRS will take the taxpayer’s property then use it to satisfy the unpaid tax debt.

A tax levy can occur in several ways. First, the IRS can physically possess the property, then sell it and keep the proceeds (assuming the proceeds from the sale are not in excess of the tax debt). Second, the IRS can withdraw money from the taxpayer’s bank account. Third, the IRS can take a percentage of the taxpayer’s income. This is referred to as wage garnishment.

 

How Can I Avoid a Tax Lien or Levy?

The best thing a taxpayer can do is to pay all the taxes they are legally required to pay. Only when the taxpayer fails to pay his or her legal tax bill, will the potential for a tax lien or levy arise. Assuming a taxpayer gets behind on his or her tax obligations, the IRS will send a series of written notices explaining the taxpayer’s tax debt and how to fix it.

The last thing a taxpayer should do is ignore the tax notices from the IRS. It’s when the IRS isn’t getting anywhere with recovering the outstanding tax bill will they take steps to impose a tax lien or levy against the taxpayer.

So even if the taxpayer cannot quickly settle his or her tax debt, they should respond to the IRS collection notices and arrange a way to pay off the tax debt. The IRS may agree to set up a payment plan or settle the tax debt for an amount lower than the full amount owed. There may also be other options, but it’s strongly recommended the taxpayer consult with a tax legal professional to discuss what they are and to decide which option is best.

 

 

 

 

 

telephone tax scam

Tax Scams Following the 2017 Tax Season

The saying “death and taxes” is incomplete. What it really should be is “death, taxes and scams.” For as long as an organized society exists, so will scams. This tax season has been no different, with many victims falling prey to unscrupulous individuals. Even though the vast majority of us have already filed our taxes for the 2016 tax year, that doesn’t mean the potential for tax scams is over until next season. One of the more prevalent tax scams still occurring is the IRS telephone scam.

How the Scam Works

The scammer will call the victim pretending to be an IRS agent or US government official. The call will often appear very legitimate, with the scammer providing a badge number to the victim, the victim’s caller ID showing the call as originating with the IRS and fake background noises played to make the victim think the spammer is calling from a busy call center.

With the stage set, the scammer tries to scare the victim into sending the scammer money because the victim has an existing tax debt with the IRS. Sometimes the scammer requests payment in an odd way, such as gift cards or money orders.

If the victim challenges the scammer’s claim that an unpaid tax bill is owed, the victim is threatened with arrest, a civil lawsuit, driver’s license revocation, deportation or other arbitrary punishments. In the current political climate, the threat of deportation will be especially effective.

Other ways the IRS telephone scam may appear genuine include:

  • A follow-up telephone call from someone claiming to be from law enforcement.
  • The scammer will have some basic information about the victim, such as a date of birth or the last four digits of the victim’s social security number.
  • The victim may also receive a letter that appears to be from the IRS reminding the victim of an outstanding tax debt.

 

How the IRS Really Works

The IRS does try to collect its outstanding tax debts, but not in a manner used by most scammers. There are several methods the IRS will use when it attempts to collect an unpaid tax bill:

  • The IRS will always provide the taxpayer with an opportunity to dispute the tax amount owed.
  • The IRS will accept various methods of payment for a tax bill, not just one or two methods. Additionally, the IRS never asks for payment to be made over the telephone.
  • The IRS may assign the tax collection duties to a private company, but there are only four private collection agencies authorized to represent the IRS: CBE Group, ConServe, Performant and Pioneer. Even if a taxpayer’s unpaid tax bill is assigned to a private collection agency, before a phone call is ever made, the IRS and the private collection agency will mail written notices to the taxpayer.

Scams Aren’t Just Limited to the Telephone

Variations of the IRS telephone scam can easily exist in other realms, such as e-mail. Many scammers will try “phishing” or pretending to be an official IRS e-mail or website in order to obtain personal information or money. The IRS may use e-mail to communicate with taxpayers, but it will never use e-mail as a method of first contact about an outstanding tax bill.

What You Can Do if You Think You’ve Been Contacted by a Scammer

If you receive an e-mail or telephone call that you believe was made or sent by a scammer, you should report it to the Federal Trade Commission or the Tax Inspector General for Tax Administration.