Please remember that prevention better than a cure. The axiom of an ounce of prevention is better than a pound of cure holds true with the IRS and the issuance of IRS bank levies and IRS wage garnishments. Levies and garnishments are strong arm aggressive collection tactics employed when the IRS believes that the delinquent tax payer is being uncooperative and non-responsive.
If you cannot pay all taxes owed when filling your return, submit IRS Form 9465, Installment Agreement Request. Form 9465 provides for an installment agreement. This permits you to pay back taxes owed to the IRS over a period of time while avoiding collection activity. The IRS installment agreement are generally accepted without question when certain conditions are met. Code section 6159(c) provides as follows: (c) In the case of a liability for tax of an individual under subtitle A, the Secretary shall enter into an agreement to accept the payment of such tax in installments if, as of the date the individual offers to enter into the agreement–
(1) the aggregate amount of such liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed $10,000,
(2) the taxpayer (and, if such liability relates to a joint return, the taxpayer’s spouse) has not, during any of the preceding 5 taxable years–(A) failed to file any return of tax imposed by subtitle A,(B) failed to pay any tax required to be shown on any such return, or(C) entered into an installment agreement under this section for payment of any tax imposed by subtitle A,
(3) the Secretary determines that the taxpayer is financially unable to pay such liability in full when due (and the taxpayer submits such information as the Secretary may require to make such determination),
(4) the agreement requires full payment of such liability within 3 years, and
(5) the taxpayer agrees to comply with the provisions of this title for the period such agreement is in effect.
The installment agreement plan should be acceptable for tax payers facing a first time tax delinquency under $10,000 that make reasonably aggressive monthly payments. The law also provides, at section (c)(3), that the IRS must determine that you are “financially unable to pay” the tax in full and on time. A financial statement, IRS Form 433-A reflects all income, expenses, assets and liabilities. IRS Form 433-A establishes your “disposable income.” The IRS equates disposable income to ability to pay
The IRS is precluded from collection activities such as bank levies or wage garnishments when an installment agreement is filed or during the pendency of negotiations of the agreement. Code section 6331(k)(2)(A). The IRS may revoke the agreement and undertake enforcement action after thirty days should the taxpayer default on the agreement.
The failure to file Form 9465 when filing a tax return without full payment may result in immediate collections. Th IRS will initially send a simple written notice reminding you you forgot to pay al of the taxes owed. This form letter will appear in five to eight weeks after the return is processed. The IRS asks for payment and calculates interest and penalties. Response and payment in conjunction with this correspondence avoids “further accumulations of interest and penalties.” Penalties and interest will continue to mount if one fails to pay the tax debt owed. The initial notice is not a notice of intent to levy as the requirements mandated by code section 6331(d)(4) are not satisfied. The final notice is marked “final notice” and provides your right to a due process hearing. The hearing is provided under code section 6330. This hearing shall occur before enforcement action may commence. Only the final notice effectuate the IRS’s enforcement rights under code section 6331(a).
All responses to IRS notices to collect back taxes or tax debt should be in writing and sent via certified mail with return receipt requested. Advise the IRS that you cannot pay the entrie IRS tax debt or tax liability in full and that you need an installment agreement. Include Form 9465 and advise on the form how much you can afford to pay on a monthly basis. Submission of the installment plan and submission of an offer in compromise will toll aggressive enforcement actions.
Advise the IRS as follows: “I do not have the income or assets to be able to pay the bill in full and enforcement action will cause an undue economic hardship by making it impossible for me to pay my living expenses.” Request an installment payment amount you calculated based on your actual income and expenses. The IRS will attempt to utilize their table for allowable expenses in your area. The IRS will request additional information via IRS Form 433-A if additional financial information is necessary or needed.
Excessive delays and failure to respond to the IRS will result in issuance of the final notice or notice of intent to levy. This notice requires immediate response. Absent immediate response, the IRS will initiate aggressive collection tactics. Contact the Tax payers advocate service or retain professional help. I provide help for reasonable payments that are generally easy to meet because I understand your situation.
Correspondence to the Taxpayer Advocate should include the final notice, the date that your received the final notice, and an explanation why you cannot endure enforcement. Include an installment agreement with this correspondence.
Uncollectible status may arise when a tax payer simply cannot pay and cannot meet a reasonable installment plan obligation. Uncollectible status results in a freeze of collections, but it also tolls your statute of limitations. Uncollectible status requires unemployment, health reasons, very low income, or a showing of undue financial hardship. Uncollectible status may be requested via IRS Form 9465. Line 11 reflects how much you can pay so put $0.00 “Zero” and advise at the bottom that you are “seeking uncollectible status.” Advise why you cannot make a payment due to your harsh financial circumstances.
Penalties and interest will continue to accrue even when the account is marked uncollectible due to financial hardship. Seek professional help to discuss options such as an Consider an Offer in Compromise, bankruptcy or other strategy to reduce or eliminate outstanding and mounting back tax obligation.
Wage and Bank Levies
Bank levies and wage garnishments are extremely difficult matters to handle, but there is recourse. A wage levy attaches to the next paycheck. All money beyond current tax withholdings and the minimum exemption amounts will be taken by the IRS. The IRS can take all money in your bank account[s]. Bank levies are governed by section 6332(c). Section 6332(c) mandates that a bank surrender your money to the IRS after 21 days. Your bank account is frozen in the interim of this process. You only have 21 days to act or that money is gone. NSF fees will accumulate and you will not be able to utilize your account or even get another account. The bank will charge an additional $ 100.00 fee for good measure. Bank levies are serious and difficult matters to handle. You should immediately consider consulting with a professional if your bank account has been levied.