When people joke about the IRS breathing down their throat, they’re usually talking about an enforced collection action. When it comes to claiming overdue taxes, the IRS has a wide repertoire of collection tools, the most dreaded of which are liens and levies that garnish your wages, seize the contents of your bank account, and force the sale of assets to satisfy your tax debt.

Fortunately, the
IRS does not generally use these forceful measures unless voluntary compliance
fails. Below is an overview of the forced collection tools and how a tax
attorney can help you overcome them.

First Come the Notices

The IRS will send
multiple notices before taking enforced collection action. Each one escalates
in urgency until it sends you a LTR1058,
otherwise known as a ‘Final Notice, Notice of Intent to Levy and Notice of Your
Right to a Hearing.’ This letter is usually your final warning before the
government initiates an enforced collection action.

Tax Levy

Internal Revenue Code
§6331(a)
allows the IRS to collect a tax debt by seizing any of your
property that is being held by a third party. Levies may be made on your
salary, bank accounts, securities, accounts receivable, and other assets that
generate or represent income. If these assets are not sufficient to satisfy
your tax liability, the IRS may also attempt to seize physical property.

Tax Lien

According to
Internal Revenue Code §6321, the IRS can collect its money by placing a lien
upon all property that you own or have an interest in. The lien equals the
amount you owe, including any interests and penalties. A federal tax lien has a
10-year statute of limitations, which can be extended due to tolling events
such as:

  • A bankruptcy filing
  • Seeing a Taxpayer Assistance Order
  • Request for a Collection Due
    Process Hearing

Trust Fund Recovery Penalty

If you own a
business that is delinquent in paying employment taxes (including Social Security
and collected excise taxes), the IRS may assess a Trust Fund Recovery Penalty.
These taxes are known as ‘trust fund’ taxes because the money is held in trust
until you make a federal tax deposit.

A Trust Fund
Recovery Penalty can be assessed against anyone who is responsible for
collecting or remitting income, employment, and excise taxes and intentionally
fails to pay them.

How Can You Avoid Enforced Collection?

The best way to
deal with enforced collection actions is to avoid them. If you cannot afford to
pay your tax debt, there are steps you can take to prevent your income and
assets from being seized.

  • Payment Plan: If you have filed all of your tax returns and are current on your taxes for the present tax year, you can propose a payment plan to the IRS. There are different IRS installment agreements designed to address how much you owe and whether the taxes are personal or business-related. While a payment plan is pending, the IRS cannot issue levies and after it is accepted, there will be no enforced collection action unless you default.
  • Offer in Compromise: An offer in compromise (OIC) is an agreement that settles your tax debt for less than the full amount owed. In general, the IRS will an OIC if all of your tax returns have been filed, you are current on your tax payments, and the amount you offer equals or exceeds the amount it could reasonably expect to collect from you. It may also agree to an OIC if there is legitimate doubt regarding your liability or collecting from you will result in economic hardship.

Contact a New Jersey Tax Debt Attorney

If you are receiving collection notices from the IRS, Paladini Law will review your tax liability to determine what solution will yield the best results for you. Even if the IRS has already seized your bank account or served a tax levy on your wages, we can help you stop these collection measures so that you can address the debt. 

Attorney Brad Paladini is one of the few attorneys in the state with a Master of Laws in Taxation, so he knows the law thoroughly and can recommend strategies that eliminate your problems with the IRS. For more information, please contact us or call 201-381-4472.

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