IRS Collections

The Collection Statute Expiration Date

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The Collection Statute Expiration Date (CSED) falls under Section 19[1] of the Internal Revenue Manual (IRM). The CSED refers to the idea that every tax assessment has a statute of limitations. The rules and procedures for the CSED are governed by statute, namely section 6502(a) of the Restructuring and Reform Act of 1998 (RRA 98).

Key Takeaways

  • According to the IRM, each tax assessment has a collection statute expiration date, or CSED (IRS.gov, “Part 5. Collecting Process, Chapter 1. Field Collecting Procedures, Section 19. Collection Statute Expiration,” 8/17/2013).
  • If you file for bankruptcy, because of the automatic stay imposed by the proceedings, the CSED is generally suspended.
  • The CSED is extended throughout the duration of the bankruptcy proceedings plus six months. It is extended on non-dischargeable tax liabilities, from the date of filing for bankruptcy to the date the bankruptcy is either discharged or dismissed.

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Psychological Effect of IRS Collections

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Achieving financial stability should be a lifelong goal. Developing financial plans and meeting long-term objectives is a lengthy process that requires patience, discipline, and endurance. What happens when your plans are disturbed because of past and present financial issues that threaten to destroy your future? Bankruptcy is one of those financial problems that take into consideration your past, your present, and your future.

Key Takeaways

  • Achieving financial stability should be a lifelong goal. Developing financial plans and meeting long-term objectives is a lengthy process that requires patience, discipline, and endurance.
  • What you have done with money up to this point will dictate, in essence, how money will be distributed from the income you bring in. Now you must develop a debt repayment plan and lose a significant percentage of your income to repaying old debts.
  • A money crisis is taxing on the mental state. This is especially significant for filers of bankruptcy.

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IRS Wage Garnishment Protocol

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Wage garnishment is the most common type of garnishment, or attachment to earnings and/or assets. Wage garnishment is defined as the process of deducting money from an employee’s wages, or monetary compensation, as a result of a court order or related equitable procedure. A wage garnishment will continue until the entire debt is paid. There are common examples of different types of debts that result in wage garnishment. These types include child support, defaulted student loans, taxes, and unpaid court fines.

Key Takeaways

  • When employers receive a notice to withhold part of an employee’s wages, the garnishment becomes a part of the payroll process. Employers are required to make the deductions until the debt is satisfied.
  • The deductions above are required by law. The deductions that are not required by law include union dues, health and life insurance, and charitable contributions (“Wage and Hours Worked: Wage Garnishment”).
  • However, Title III allows for the garnishment of wages at a greater amount when it comes to child support, bankruptcy, and/or federal or state tax payments (“Wages and Hours Worked”).

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IRS Penalty Abatements and Reasonable Cause

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IRS Penalty Abatements

As noted previously, the purpose of (assessing) a penalty is to encourage voluntary compliance. “Voluntary compliance exists when taxpayers conform to the law without compulsion or threat” (IRS.gov, “20.1.1.2.1 Encouraging Voluntary Compliance,” 8/14/2013). The taxpayer supports the tenets of the Internal Revenue Code in achieving voluntary compliance when he or she makes a good faith effort to meet all tax obligations (“Encouraging Voluntary Compliance”).

Key Takeaways

  • As noted previously, the purpose of (assessing) a penalty is to encourage voluntary compliance. “Voluntary compliance exists when taxpayers conform to the law without compulsion or threat” (IRS.gov, “20.1.1.2.1 Encouraging Voluntary Compliance,” 8/14/2013).
  • Within this context, the taxpayer is deemed compliant when he or she responds to written materials outlining the tax rules and completes all forms relevant to their tax liability.
  • When a taxpayer provides an explanation to support his or her request for relief, the IRS waives and/or abates the applicable penalty.

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How IRS Interest is Calculated

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You are required to file a return if you have earned income in the previous year. You are also required to pay all tax by the due date to avoid IRS interest and penalty charges. The official due date to file and pay taxes is April 15. This is the “deadline for most people to file their individual income tax return and pay any tax owed” (IRS.gov, “Topic 653 – IRS Notices and Bills, Penalties and Interest Charges,” 7/26/2013). All U.S. tax returns are checked for mathematical accuracy. In the event that you owe money to the IRS, you will be sent a bill. With this in mind, familiarize yourself with the different types of penalties and IRS interest charged to your tax balance as well as the procedures and methods used to calculate interest and penalties.

Key Takeaways

  • You are required to file a return if you have earned income in the previous year. You are also required to pay all tax by the due date to avoid IRS interest and penalty charges. The official due date to file and pay taxes is April 15.
  • For example, there is an IRS interest charge on the unpaid tax. Unpaid tax is determined by the balance due from the date of the return to the date of payment (“Topic 653”).
  • It is important to note that the one-half of one percent rate will increase to one percent when the tax is unpaid for 10 days; and this is the time maximum for after the IRS issues a notice of intent to levy.

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How to Fight a Wage Levy

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Fighting a wage levy involves taking the steps necessary to ensure your assets are protected. However, when there is an outstanding tax liability for which you are responsible and when you do not satisfy the debt, the IRS will pursue action that may involve attaching an interest in your paycheck. With this in mind, a wage levy is a legal seizure of property to satisfy a debt. If you do not pay your taxes, the IRS may seize and sell any type of property belonging to you to satisfy the tax liability.

Key Takeaways

  • Fighting a wage levy involves taking the steps necessary to ensure your assets are protected.
  • The process for attaching an interest to your wages is three-part.
  • With all of this in mind, when it comes to wage levies, the most important strategy for avoiding the levy is to pay the taxes owed. When the IRS sends a Notice and Demand for Payment, respond to that notice with a payment.

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Can I Make Payments to the IRS?

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IRS audit defense guide — Brotman Law

Many people who are not able to pay their tax payments immediately ask the question “Can I make payments to the IRS?” The answer is yes; however, paying your full tax debt will save you the set up fees and reduce or eliminate penalty costs. If you have another source, such as a credit card or loan, you could save money by paying your entire tax bill. If you have no other options, IRS installment agreements are a great way to help you avoid default.

Key Takeaways

  • Many people who are not able to pay their tax payments immediately ask the question “Can I make payments to the IRS?” The answer is yes; however, paying your full tax debt will save you the set up fees and reduce or eliminate penalty costs.
  • Prior to applying for installment agreement, you must file all of the required tax returns. Determine the amount you are able to pay each month. There is a minimum monthly installment requirement of $25.
  • You also want to know “Can I make payments to the IRS to avoid default with the IRS?” If you understand your IRS installment agreement, you will be able to avoid default.

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IRS Tax Lien Release – Part Three – Release and Subordination

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Continued from IRS Tax Lien Release – Part Two – Lien Withdrawal

Key Takeaways

  • Second to getting the IRS to withdraw the lien entirely, you want to make sure that you get a tax lien release from the IRS. A tax lien release will still appear on a taxpayer’s credit, but the lien will be shown as paid and not have as adverse an effect.
  • Finally, it the IRS will not agree to tax lien withdrawal or tax lien release entirely, a lien subordination is a third option for dealing with an IRS lien.
  • In conclusion, IRS tax liens are problematic for taxpayers and are best dealt with sooner rather than later. That said, if a lien has been placed on your property there are a number of options for resolving the issue.

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IRS Tax Lien Release – Part Two – Lien Withdrawal

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Continued from IRS Tax Lien Release – Part One – Avoiding a Lien

Key Takeaways

  • Once the IRS tax lien is in place, it generally will not release it unless the balance owed is paid in full or there is another justification for removing it (such as it was filed erroneously or is for a year that is no longer subject to collections).
  • Lien withdrawal is one remedy that taxpayers can seek from the IRS. If possible, you want to try to get liens withdrawn than simply released or subordinated.
  • Additionally, taxpayers can get a lien withdrawn after the fact by entering into a direct debit installment agreement with the IRS.

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IRS Tax Lien Release – Part One – Avoiding a Lien

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Introduction to IRS Tax Lien Release

One of the biggest debates in the tax practitioner community is the efficacy of IRS tax liens. On one hand, IRS tax liens help the government protect its interest in a taxpayer’s property and secure the underlying tax obligation with real or tangible personal property. On the other hand, liens damage a taxpayer’s credit, place an obstacle in the way of the taxpayer selling that property or borrowing against it in order to pay off their liability, and generally do nothing to satisfy the immediate concern of the IRS. Furthermore, it is extremely difficult to get a lien release and liens are a noted hassle to dispose of once they have been filed against a taxpayer. However, there are a number of things that the taxpayer can do if they are affected by a federal tax lien in order to secure a lien release or achieve some other workable solution that allows them to make progress on the account. After all, the IRS is simply seeking a workable resolution to the problem.

Key Takeaways

  • One of the biggest debates in the tax practitioner community is the efficacy of IRS tax liens.
  • First of all, although it may go without saying, the easiest way to not have to worry about federal tax liens is to not get them in the first place. Being compliant with your federal tax obligations is a one hundred percent guaranteed way to avoid a tax lien.
  • Along those lines, the IRS generally does not go through the trouble of placing a lien on taxpayers who owe smaller liabilities.

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