IRS Collections

IRS Transcripts – Part One – IRS Account Transcripts

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To assist taxpayers and practitioners, the IRS will provide taxpayers with transcripts of the information that the IRS has on file. There are three main types of IRS transcripts that taxpayers should be aware of before checking their account. These are IRS account transcripts, IRS return transcripts, and IRS wage and income transcripts.

Key Takeaways

  • To assist taxpayers and practitioners, the IRS will provide taxpayers with transcripts of the information that the IRS has on file. There are three main types of IRS transcripts that taxpayers should be aware of before checking their account.
  • The most important transcript for checking activity on your account for any given year.
  • IRS account transcripts should be reviewed thoroughly to ensure that all information is correct on your account. The first thing that you should check for is to make sure that your return appears on this transcript as being filed.

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What if I Cannot Pay an IRS Balance Due?

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In the tax world, to quote Benjamin Franklin, an ounce of prevention is worth a pound of cure. Almost all taxpayers can engage in some level of tax planning to their benefit prior to a return being filed. As a practitioner, I like to perform a mid-year check with my clients to review their current tax situations and to make sure they are on track with where we have identified they need to be. Although particularly helpful with self-employed individuals and those with small businesses, to ensure that they are making proper tax deposits, it can also be helpful for W2 employees who want to adjust their withholdings during the course of the year. In addition, I would recommend checking in with a tax professional to understand the tax consequences of any major life events. Getting married, having a child, changing jobs, getting a raise, buying a house, moving, caring for another individual, and a variety of other changes can all impact your future tax situation. It is always better to be able to be aware that you may have a balance due at the earliest possible juncture in order to try and minimize your liability.

Key Takeaways

  • In the tax world, to quote Benjamin Franklin, an ounce of prevention is worth a pound of cure. Almost all taxpayers can engage in some level of tax planning to their benefit prior to a return being filed.
  • If tax planning cannot mitigate the liability, usually it is best to file the return as soon as you can.
  • Although filing a return may put the IRS on notice of the liability sooner, filing the return has two principal advantages.

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IRS Allowable Living Expenses – Part One

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Although a favorite saying of IRS revenue officers is that “The IRS is not a bank” and the Service does take collection of taxes owed seriously, the IRS is prevented from collecting assets that a person needs to survive and meet their basic living requirements. The IRS calls these “Allowable Living Expenses” and they are excluded from the calculation that collection agents use to determine a taxpayer’s reasonable collection potential. Keep in mind that regardless of the size of the liability, whether one thousand or one million dollars, the IRS will always allow the taxpayer to keep enough cash to pay for their allowable living expenses.

Key Takeaways

  • Although a favorite saying of IRS revenue officers is that “The IRS is not a bank” and the Service does take collection of taxes owed seriously, the IRS is prevented from collecting assets that a person needs to survive and meet their basic living requirements.
  • So what does the IRS consider allowable living expenses? The IRS has developed a test called the necessary expense test to determine whether or not it will allow an expense to be included.
  • 3. Other Conditional Expenses – expenses, which may not meet the necessary expense test, but may be allowable based on the circumstances of an individual case.

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How to Deal With an IRS Bank Levy – Part One

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When you owe a balance due to the IRS and fail to resolve that balance in a timely manner through one of the approved resolution methods, the IRS takes increasing stern action to try and force compliance on your part. One of these avenues is though an IRS bank levy. An IRS levy is defined as “a legal seizure of your property to satisfy a tax debt.”[1] In the case of an IRS bank levy, the IRS takes money from your checking or savings account in order to satisfy your outstanding tax liability. Although the IRS is required to send notice of its intent to levy under statute, it usually does not tell you when it plans to seize money out of your checking account. Sometimes this puts taxpayers in a precarious position because they count on funds being in these accounts that are no longer available due to the IRS levy.

Key Takeaways

  • When you owe a balance due to the IRS and fail to resolve that balance in a timely manner through one of the approved resolution methods, the IRS takes increasing stern action to try and force compliance on your part.
  • The IRS bank levy process is initiated by a notice sent from the IRS to the bank that is holding your assets.

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