Where’d My Paycheck Go? Understanding IRS Wage and Income Levies

When Tom S. got a call from HR, he knew it wasn’t good news. “They wanted me to go down there, so I went down there and they told me that they’d gotten a notice from the IRS. Because I had unpaid taxes, the IRS was levying my paycheck. I’d have 125 dollars left after the levy was taken out from each paycheck until all my back taxes were paid off – so I was looking at the next 3 months with hardly no money to live on!”

IRS Wage and Income Levies: Your Employer Has To Comply!

“I asked HR if there was some way they could let things slide, just for a week or two, so I could get prepared for the financial hit,” Tom said. “But they told me no way. If a company doesn’t do what the IRS tells them, they could get hit with huge penalties and fines.” Tom sighed. “By the time that conversation was over, it was pretty clear to me that I was lucky to have a job at all.”

Many people don’t know that it’s perfectly legal for your employer to terminate your employment if you have tax trouble with the IRS or MA DOR.  Having tax problems can be seen as a motivation to commit embezzlement – and no one wants to have a potential criminal working for them!

Types of Wage and Income Levies

There are two types of IRS wage and income levies. A continuous levy is generally brought against someone who has an employer and receives a regular paycheck. A non-continuous levy is generally brought against someone who receives a form 1099-MISC, and is considered self-employed. If you’re self-employed, you can imagine how embarrassing and stressful it would be to have the IRS contacting the people you do business with directly trying to collect your tax debts. It’s the type of thing that can ruin your business reputation.

What Can Be Done About Wage and Income Levies

If you receive notice that the IRS is going to levy your wages or other income, you want to get help right away. An experienced tax professional can work with the IRS on your behalf to resolve your tax issues and have the wage or income levy released. This can mean setting up a payment plan with the IRS, making an offer in compromise, or taking advantage of other legal means to solve your tax problems.

You have to take action! A wage or income levy won’t go away on its own, and every day it’s in place is a day that’s damaging your reputation with your employer or customers. If you’re dealing with a wage or income levy now, and you want the pain to stop, give us a call. We’re here to help!

Are Tax Troubles Ruining Your Marriage?

Supermodel and host of the reality television hit Project Runway, Heidi Klum is going into the advice business. Klum plans on sharing her insights on fashion, beauty, parenting and relationships with her fans.

Klum is married to pop singer Seal, and from all reports, the two have a strong and loving relationship. It’ll be interesting to see how the couple’s considerable financial wealth impacts her relationship advice – after all, financial issues are the leading cause of marital strife. MSN money recently detailed half a dozen ways that money can wreck a marriage.

Not on the list but definitely a big problem for many couples: tax problems. Unresolved tax issues can ruin your relationship. Here’s why:

Stress and Tension

The IRS uses aggressive and persistent collection techniques. The phone calls, intimidating notices, and threats of liens, levies on your wages and bank accounts, and seizure of your car or house can create an atmosphere of fear and anxiety that takes a toll on even the strongest marriages.

Financial Impact of IRS Actions

Tax liens can prevent a couple from borrowing money. This can make it difficult to buy a home, a car, or fund a child’s education. Not being able to realize long-cherished dreams such as these can create resentment and even hatred within a relationship. Additionally, many employers review a prospective employee’s credit report for IRS liens and often reject taking on a prospective employee who’s had trouble with the IRS. In today’s competitive job market, that can make finding and keeping a job even tougher.

What Can Be Done About IRS Tax Trouble?

Tax trouble doesn’t have to wreck your marriage. There are solutions to your outstanding tax issues. Often, simply beginning the process of dealing with unpaid taxes, unfiled tax returns, or other tax issues, eliminates a lot of stress and tension from the marriage. Knowing that the tax problem is getting fixed can put a couple back on the path to building a strong, happy life together – and that’s what a relationship is supposed to be about!

A taxing situation…With the new IRS, coming forward is the best option for late filers, non-filers, and delinquent payers.

By April 15, 2010, 84 percent of Americans filed their tax returns on time. That means 16 percent didn’t. That omission translates to a figure somewhere near $345 billion in taxes owed to the U.S. Treasury Department. With a budget deficit in the trillions and rising, the IRS is expected to increase its audits of both personal and business tax returns as well as pursue greater enforced collection action against individuals and businesses using levies, liens and seizures.  And that puts late filers, non-filers and delinquent payers on notice: Uncle Sam wants you now more than ever.

So, what’s a non-filer or delinquent payer to do? Many will delay dealing with the problem, literally hiding from the IRS. Yet according to Matthew J. Previte, CPA, a local taxpayer advocate expert and owner of TaxProblemsRUs.com, the IRS will get its money and then some from non-filers and delinquent payers in penalties and interest. The key is to be proactive and face the music.

“When we’re children, our parents said if we told the truth, things would be far easier on us than if they found out later. That may sound rather simplistic, but it’s the same with the IRS and your state’s DOR,” said Previte. “There are a number of options that you can work out with the IRS and your state to address your situation.”

Besides a lack of funds, pride, procrastination and a number of other reasons, most people are quite intimidated by the IRS and hesitant to come forward before the IRS comes to them. Since 1997, Previte’s Natick, Mass.-based tax firm has specialized solely in representing individuals and businesses with federal and state tax problems, including audits, non-filers, and delinquent payers.

“What most people do not realize, and that includes many CPAs and tax attorneys, is that dealing with the IRS and state DORs is a specialty unto itself,” said Previte. “We can provide our clients with resolutions to very sticky situations not only because we’re licensed tax professionals but because we have successfully worked with both the IRS and state tax agencies full-time on a daily basis for many years and we know how they work.”

So what are some of the options available to people who owe taxes? Some options include:

  • Offer in Compromise program – This little known program enables qualified taxpayers to negotiate a settlement for a fraction of what they owe. Who qualifies? Those taxpayers who can demonstrate an inability to pay their delinquent taxes in a short period of time.
  • Payment plan – Many people are able to pay their tax debts but just need a little time to pay it off. Negotiating payment terms you can live with is the key. Unfortunately, penalties and interest will continue to be charged on your outstanding balance as you pay the debt off. However, you may qualify to have the penalties removed or abated if you can show reasonable cause for filing late or paying late. For those unable to pay their tax debts in full over time, a Partial Pay Installment Agreement may be available. Under this option, payments are made until the collection statute expires. Any unpaid balance at the end of the collection statute expires and becomes legally uncollectable, leaving the taxpayer free from paying the remainder of any balance due.
  • Bankruptcy – Did you know that taxes in many cases can be discharged or wiped out in a bankruptcy. Many people, as well as attorneys, are not aware of this. For those who qualify, bankruptcy often times can be the solution to resolve their crushing tax problems. Proper pre-bankruptcy planning—for Chapter 7, Chapter 11, or Chapter 13—is key to determining if bankruptcy is or can be a viable solution.
  •  Uncollectible status – Every year the IRS puts many taxpayers into the “Uncollectible Status” category or classifies them “Currently Not Collectible” (CNC). What essentially this means is that the IRS will not proactively seek back taxes from a taxpayer that owes because of validated economic hardship. If their finances improve (as they will monitor) collection efforts will resume.
  • Penalty Abatement – The IRS charges penalties for filing late, paying late, underpaying your estimated tax payments if you’re self-employed, negligence if you make mistakes in preparing your tax return, etc. Many citizens could pay off their tax debts if it weren’t for penalties that double, triple, or quadruple their tax bill. The law does allow taxpayers who have “reasonable cause” to file for a Penalty Abatement.
  • Lien SubordinationSome taxpayers could pay off their tax debt if they could get a home equity loan. Unfortunately, these taxpayers can’t get home equity loans to pay off their old tax debt because the IRS has filed Federal Tax Liens against their property. A Lien Subordination allows the IRS to reduce its Lien priority and give your bank superior Lien priority protecting their loan in exchange for the proceeds from the loan. This way, the IRS gets the equity it had a Lien against and your bank is protected by their superior Lien.
  • Innocent Spouse Relief – When married couples sign a joint tax return, they both become liable for the taxes on that return. If at some future time the IRS audits that joint tax return and determines that additional taxes are due, both spouses become liable for the taxes. Unfortunately, these additional taxes are sometimes due to the misdeeds or fraud committed by one spouse. Sadly, the Innocent Spouse also gets saddled with the tax debt. Innocent Spouse Relief was designed to alleviate unjust situations where one spouse was clearly the victim of fraud perpetrated by their spouse or ex-spouse. If you qualify for Innocent Spouse Relief, you may not owe any tax.

“These are just a few of the scenarios where having a qualified licensed tax professional represent you can literally save you thousands of dollars and dramatically reduce the stress and anguish that comes with having tax debt hanging over your head—and your family’s for that matter,” said Previte.

For more information on TaxProblemsRUS.com, please visit www.TaxProblemsRUs.com. To schedule a free confidential consultation, call 877-259-8200.