Frequently Asked Questions…And Their Answers
Does the IRS have to give me notice before taking my wages?
The IRS is the envy of any commercial collection agency. Without going to court, winning the case, entering a judgment, and getting the sheriff’s department to serve notice, the IRS only has to file a Form 668-W, Notice of Levy on Wages and Other Income, with your employer. It can then seize your income. Before the Notice of Levy is filed, the IRS must give you written notice. You will receive a Letter 1058, Final Notice. After receiving the Final Notice you have 30 days to appeal the proposed levy. If you don’t exercise appeal rights, the IRS levy stays in place and your employer must send the non-exempt portion of your paycheck to the government (see below). The IRS does not have to send you the Final Notice before each enforced collection action, such as seizing your bank account or wages. If months or years go by after the Final Notice is sent, taxpayers often undergo the shock of losing their paycheck without having immediate notification.
Can the IRS take all of my paycheck?
The IRS takes the nonexempt portion of your paycheck. That leaves you with the “exempt” portion, which is not much. For example, a taxpayer who is single with a $4,000 personal exemption and $5,000 standard deduction would take home $173.08 per week. A family of four who filed a Married Filing Joint tax return would have to live on $500 per week.
What is the Automated Collection Service of the IRS?
Known by its initials, ACS is the faceless computerized system manned by an army of collection technicians who contact taxpayers, search for taxpayer assets, and handle taxpayer correspondence. With the push of a button, ACS personnel can seize your bank account or wages. ACS technicians have a reputation for being aggressive. Generally ACS personnel are poorly trained and lack authority to solve problems on many cases. ACS may place you on hold for extended periods by an automated answering system. On each occasion you will be assigned a different person with whom to speak. Many IRS horror stories begin in ACS.
I can’t pay my back taxes. What can you do?
We devise a strategy that works for you which may include a negotiated settlement (Offer in Compromise), extended payment plan (Installment Agreement), getting you declared “uncollectible”, or, in extreme cases, filing bankruptcy. Each taxpayer’s situation is unique. We use our expertise and experience and the law to solve your tax problems and improve your life.
I haven’t filed my tax returns. What should I do?
Call a tax attorney. Failing to file tax returns is one of the most dangerous situations a taxpayer can face. Because failure to file can lead to a criminal prosecution, you need to work through a tax attorney to keep all your information confidential through the Attorney-Client Privilege. If before hiring a tax attorney you engage an accountant who prepares and files your returns, the IRS can compel the accountant to testify against you in a criminal trial. Under the law, the information you tell your attorney stays confidential.
It’s important to file your tax returns, and not just to avoid being sent to jail. Without filing tax returns, you cannot benefit from a reduced settlement (Offer in Compromise) or pay over time (Installment Agreement) or discharge your taxes in bankruptcy. Without filing tax returns, the IRS can pursue you as long as you live, even collecting from your estate, because the Statute of Limitations time clock won’t begin to run.
I just received an audit notice. What should I do?
Call a tax attorney right away. When you face an income, employment, or sales tax audit, highly-trained government officials examine your returns and records in detail to ensure you have paid the “right” amount of tax. Because the tax laws are very complicated and subject to different interpretations, often times auditors incorrectly assess large amounts of additional tax. Once the IRS inflates the amount of taxes owed, the number you owe skyrockets because of added penalties and interest.
Your best defense is a tax attorney for three reasons: 1) A tax attorney ensures that all your information stays confidential because of the Attorney-Client Privilege, which is not the case if another professional represents you. 2) Armed with all your legal rights, a tax attorney gives you total protection from the beginning of the process until its satisfactory conclusion. 3) When you face an audit, a tax attorney offers you the skills of negotiation and advocacy to protect you from overzealous auditors.
I haven’t paid my employment and payroll taxes. Can the IRS hold me personally liable?
Yes. Once a business owes payroll taxes for multiple periods, the IRS is much more likely to shut it down and seize the assets. Focused on payment, the IRS identifies the responsible parties who failed to turn over the taxes, usually the owners and managers, and holds them personally liable. Personal liability for income tax withholdings is known as a “Trust Fund Penalty.”
The IRS will assess a Trust Fund Recovery Penalty against a person who was required to collect and turn over payroll taxes and who willfully failed to do so. That person becomes personally liable for 100% of what was not collected and turned over to the government. Revenue Officers are directed to conduct extensive interviews to determine who the responsible person was, but often times they take a shotgun approach and assess bookkeepers, accountants, owners, and managers. Trust Fund Penalties often are large. They cannot be discharged in bankruptcy. Because the liability is personal in nature, your home and other property become a target for the IRS. Your credit can be ruined. A person burdened with Trust Fund Penalties has to deal with enormous personal stress.
Legitimate defenses exist to protect you from Trust Fund Penalties. An experienced tax attorney can help prevent the imposition of Trust Fund Penalties or resolve them if properly assessed. STS Tax Law defends individuals using the power of the law to ensure you are not unfairly accused.
Can I be held liable for my spouse’s taxes?
Yes. Many spouses who go through a divorce often have to deal with an outrageous burden never anticipated – a tax bill for their ex-husband or ex-wife. Because most married couples file joint returns, each spouse is liable for all of the taxes. If the IRS comes back three years later and determines ones of the spouses didn’t report all of his income on a return the couple filed jointly, the IRS will pursue both spouses for payment. The couple may be separated or divorced, but the IRS can seize the bank account and paycheck of the innocent spouse.