Tax Debt Resolution Archives

The IRS and Private Debt Collectors

I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS. The IRS reinstated an old program in 2019 of using non-government collection agencies to collect IRS tax debts. The IRS’s policy is to only assign accounts that have been “inactive” for more than a year. These collectors are limited in what they can do to collect these debts which is generally a good thing. However, they also do not have the ability to negotiate with taxpayers beyond recommending a payment plan.

What can the Private Debt Collectors do?

Ask that the debt be paid in full, and failing that
Offer to help with an installment plan.

They are required to be respectful and to not threaten you. If you do feel like you are being mistreated, you can report them with this link.

What can they not do?

They cannot negotiate an Offer-in-Compromise to pay less than the face value of the debt. This is an important option that allows the IRS and the taxpayer to come to an agreement that gets the debt off the IRS’s books and allows the taxpayer to get on with their life.
Additionally, from what I can tell, they cannot change the taxpayer’s status to “Uncollectable”.
They cannot report your debt to a credit bureau. The IRS will also not report you to the credit bureaus, but the filing of a Notice of Federal Tax Lien will almost certainly be picked up by the credit bureau processes.

What should you do if notified of your debt being assigned to a Private Debt Collector?

IRS procedures are to notify you with Notice CP40 that they are assigning your case. You have the right to request that it be reassigned to an employee of the IRS and I recommend you do just that.

Beware

You can bet that there will be a lot of telephone and email scams from people claiming to have IRS authority to collect tax debts. If you have the Notice CP40, there is a “Taxpayer Authentication Number” on the letter that you can use to verify that the caller is possibly legitimate. If the caller cannot tell you that number, they are most certainly scammers.

If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email jim@taxrepgainesville.com.

What about IRS Levies?

I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS. A Federal Tax Levy is the actual seizure of a taxpayer’s assets because of past-due taxes. Usually, it involves a bank account or wages.

There are two types of Levy. A Regular Levy is one that seizes what the taxpayer owns at that moment such as cash in a bank account. The other variation is the Continuing Levy which stays in place to continue to grab wages as they are earned.

The IRS and Qualified Plans

One of the big myths is the idea that the IRS cannot Levy an IRA, 401(k) or other qualified retirement plan. While it may be true that other creditors can’t reach these funds, the federal government and its agencies are exempt from this restriction. If the taxpayer has the right to liquidate one of these accounts, then the IRS has the right to step into their shoes and grab the funds. Worse, the 10% early withdrawal penalty still applies.

What to Do

What is the best technique for avoiding one of these levies? It’s simple, don’t ignore IRS notices. Contact them and do your best to resolve the situation. As long as you are providing returns and information to the IRS to resolve the situation, there is no need for the IRS to resort to their big hammer — the Levy.

Should the IRS Levy your bank account or your wages, not all is necessarily loss. Your bank or employer is required to hold the funds for 21 days before sending it on to the IRS. If you move quickly, you can begin negotiations with the IRS and perhaps get the Levy released before the money is paid over to the IRS.

What about IRS Liens?

I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS. IRS Liens are a big part of the IRS Collection Division’s tool kit for collecting back taxes. If a taxpayer owes money to the IRS, there is an automatic tax lien against them, all of their assets, and any future assets that they might acquire.

What the IRS Must Do

The IRS must have assessed the tax liability,
The IRS must have given the taxpayer notice of the amount assessed and has demanded payment, and
The taxpayer has failed to pay the amount assessed within 10 days after notice and demand.

Public Notice

These silent liens are not a big problem. But, when the IRS goes public your life cam become miserable in a hurry. They do this by filing a Notice of Federal Tax Lien at the courthouse where you own real estate. The result is an immediate hit on your credit rating. Additionally, you will receive a deluge of mail from national companies claiming that they can make a deal with the IRS for pennies on the dollar. Unfortunately, Offers-in-Compromise to minimize the debt are formula driven. This formula considers the taxpayer’s equity in the assets they own plus their expected future earnings. Superior negotiation skills has very little to do with it.

What to Do

If you receive a Notice of Federal Tax Lien, your best option is to contact the IRS and resolve the issue. Resolution will come in the form of an Offer-in-Compromise or a payoff. It usually takes the IRS a minimum 30 days to issue the lien release.

If you or someone you know has received a Notice of Federal Tax Lien or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email jim@taxrepgainesville.com.

Solid Steps to Avoid IRS Liens or Levies

If you’re a Gainesville (FL) business owner, we share a desire — to avoid IRS tax liens and levies! If your firm is financially sound, with handsome profits and all debts and taxes paid timely, that’s wonderful. Go on vacation and send me a postcard. But few entrepreneurs can avoid all the ditches on the road to success, and many end up with unwanted IRS letters in their mailboxes.

Depending on the tax debt involved, this can lead to fear, panic, and paralysis. I’m also a business owner and have experienced hard times. But as a long-time CPA and former IRS agent, I know my IRS options, keep up with changes in the law, and was able to avoid the deepest ditches or become insolvent.

To start you feeling relief and hope, here’s my key advice on resolving all IRS problems:

Don’t ignore IRS correspondence — replies buy you time and perhaps favor. Never lie to the IRS. Get current with all filings, and make any payments due for your current year tax returns. If you can’t make the full payment due, send less, but send. Figure out your options by filling out IRS form 433 to assess your future cash flows and any assets that might be available for liquidation.

Depending upon how this analysis comes out, you might be able to make an installment agreement, make an offer in compromise, file bankruptcy, or convince the IRS that the tax debt is simply not collectible currently.

If you cannot make a satisfactory deal (you may not like any deal the IRS proposes), the IRS will likely begin collection by attempting to levy your bank accounts and/or place liens on the property you own. It is critical that you request an appeal hearing within 30 days of any lien or levy notice date.

The bigger the number of the debt, the more it pays to get professional representation. If you live in Gainesville, Florida, and have an IRS problem, call me at (352) 317-5692 for a free consultation. You can also send me an email at jim@taxrepgainesville.com.