Tax Collection Representation
We routinely assist clients in coming up with a strategy to resolve delinquent tax liabilities with the taxing authorities. If you do not pay in full when you file your tax return, you will receive a bill. This bill begins the collection process, which continues until your account is satisfied or until the taxing agency may no longer legally collect the tax, for example if the collection period has expired. In addition to the underlying tax bill, various penalties and interest on the tax and the penalties will continue to accrue.
Absent a plan agreed to by the IRS or applicable taxing agency, collection activity will commence as authorized and required by law. Enforced collection activity can include, but is not limited to, Tax Lien(s), Wage or Bank Levy, Account Receivable Levy, Property Seizure, Offsetting of Refund, etc. If not properly addressed, levies can have a devastating effect on most taxpayers. You may lose your wages, holdings in your bank or investment accounts. Your retirement savings may be liquidated and your cars and non-cash assets may be seized and sold at an auction.
We routinely represent clients in a variety of collection matters. We begin with devising a comprehensive strategy to resolve the tax debt in a manner that will meet short term and long term individual goals in light of federal and state law to best serve our client. There are a variety of avenues which we may recommend.
Due Process Hearing
The government has the right to seize all of your assets to satisfy any tax liabilities. For example, the Internal Revenue Service can place tax liens against and/or seize or sell the real property that you own and levy your bank accounts. The Internal Revenue Service can also garnish virtually all of your earnings until your tax liability has been satisfied in full. Such a seizure is usually so substantial that individuals almost always cannot afford to pay their rent, mortgage, automobile payments or even purchase groceries.
However, before the Internal Revenue Service can take any of these actions, the taxpayer must be offered the opportunity to request a Collection Due Process hearing before the Internal Revenue Service Office of Appeals. If you do not agree with the Internal Revenue Service's decision from the hearing, you may potentially make an appeal to the United States Tax Court.
A Collection Due Process hearing is available before the Internal Revenue Service Office of Appeals if a taxpayer receives the following notices:
- Final Notice - Notice of Intent to Levy and Notice of Your Right To a Hearing
- Notice of Jeopardy Levy and Right of Appeal
- Notice Of Levy On Your State Tax Refund - Notice To A Hearing
Each of these notices affords the taxpayer the right to a hearing before the Internal Revenue Service Office of Appeals. However, the request for a hearing must be made within thirty days of the date of the notice. After the thirty days have passed from the date of the notice, the Internal Revenue Service can proceed with “enforced collection” action. However, if a taxpayer timely requests a “Collection Due Process Hearing”, “enforced collection” actions from the Internal Revenue Service will stop until a hearing is granted.
During the hearing, a taxpayer may raise any issues relevant to the assessed unpaid tax including, but not limited to, the following:
- Any appropriate spousal defenses such as a claim for innocent spouse relief
- Challenges to the appropriateness of a filing of a Notice of Federal Tax Lien
- Offers of collection alternatives
- In certain cases, challenges to the existence of the liability specified on the notice
After the Internal Revenue Service Office of Appeals has considered the case, they will issue a “Notice of Determination.” The Notice of Determination should set forth the decision of the Office of Appeals. The “Notice of Determination” should also advise the taxpayer of his or her right to seek judicial review within thirty days of the date of the notice. If the taxpayer disagrees with the decision of the Internal Revenue Service, depending on the facts and circumstances of the case, he or she may file an action within the thirty day period in either the United States District Court or the United States Tax Court, whichever is appropriate.
The attorneys at Moskowitz LLP, A Tax Law Firm have successfully filed Collection Due Process hearing requests for clients contesting their liabilities as stated by the Internal Revenue Service. Below are examples of cases in which the attorneys at Moskowitz LLP have represented taxpayers in situations involving instances where they received "Final Notices" from the Internal Revenue Service.
Example 1: A married couple was assessed a federal tax liability of $132,142. The liability resulted from an audit of their tax returns. The Internal Revenue Service filed a tax lien on the couple's home for the amount assessed and sent them a Notice of Intent to Levy for the balance due. The attorneys at Moskowitz LLP timely filed a request for a Collection Due Process hearing in response to the Internal Revenue Service's levy notice and ultimately filed a petition contesting the liability in the United States Tax Court. Through extensive negotiations, the attorneys at Moskowitz LLP convinced the Internal Revenue Service to adjust the couple's federal tax liability from $132,142 to zero.
Example 2: The Internal Revenue Service audited a couple's tax return and assessed a federal tax liability of $139,163. The Internal Revenue Service sent the couple a Notice of Intent to Levy for the assessed liability. The attorneys at Moskowitz LLP timely filed a request for a Collection Due Process hearing in response to the levy notice and ultimately filed a petition contesting the liability in the United States Tax Court. Through extensive negotiations, the attorneys at Moskowitz LLP convinced the Internal Revenue Service to adjust the couple's federal tax liability from $139,163 to $42,888.
Offer In Compromise & Installment Payment Agreements
If you have outstanding income tax liabilities that have not been satisfied, the Internal Revenue Service will most likely proceed with enforced collection actions against you. “Enforced collection” actions usually create severe economic hardships on you and your family.
If you have an outstanding federal income tax liability that you cannot satisfy, the Internal Revenue Service and applicable state taxing agencies will likely place tax liens against your home and/or may seize and sell it and levy your bank accounts. This means that the government has the right to seize all your assets to satisfy your back tax liabilities. The taxing authorities can also seize your wages until your tax liabilities have been paid in full. Such seizures are usually so substantial that the individual being levied often cannot afford to pay their rent, mortgage, automobile payments or even purchase groceries.
However, before the Internal Revenue Service can take any of the actions mentioned above, they must issue a notice entitled "Final Notice Of Intent To Levy And Your Right To A Hearing" to allow a taxpayer thirty days from the notice to pay the balance in full or to make other arrangements. The most common mistake taxpayers makes in these circumstances is to do nothing or ignore the notice because once the thirty days have passed, the Internal Revenue Service is free to begin seizing the individuals property and earnings.
Our law firm often files Collection Due Process hearing requests with the Internal Revenue Service to temporarily stop them from enforced collection actions while we are presenting your case that you do not owe anything or do not owe the total amount or that a better option exists. In certain cases, the filing of a Collection Due Process Hearing also provides our office with the ability to negotiate an Offer in Compromise or an Installment Payment Agreement. The filing of a Collection Due Process Hearing may also permit our office the opportunity to raise certain defenses regarding the IRS assessment against you. At the conclusion of the Due Process hearing, the Internal Revenue Service will issue their findings in a letter entitled "Notice of Determination." If you do not agree with the determination letter, in certain cases, our office can file a petition with the United States Tax Court to review the Collection Due Process hearing.
If the Collection Due Process hearing did not resolve your matter with the Internal Revenue Service or you missed your opportunity for a Collection Due Process hearing and you still have a tax debt you cannot afford to pay in full, or you dispute what the Internal Revenue Service claims is owed, you may resolve your outstanding tax liabilities through an Offer in Compromise. An Offer in Compromise is an agreement between the taxpayer and the Internal Revenue Service or state taxing agency, which resolves the taxpayer's tax liabilities for less than full payment of the assessed liabilities. The Internal Revenue Service permits Offer in Compromises to be filed under these circumstances:
- Doubt of Liability (You don’t owe the tax because of a legal reason)
- Doubt of Collectibility (You don’t have the income or assets to pay)
- If the Offer in Compromise would promote effective tax administration. (It would be “unfair” for you to pay)
The most frequent Offer in Compromise submitted to the Internal Revenue Service is under “Doubt of Collectibility.” Under this program, the taxpayer must demonstrate that he or she has insufficient assets to satisfy the tax debt and/or his or her income is within the Internal Revenue Service' prescribed guidelines.
We believe that it is essential for a taxpayer applying for an Offer in Compromise program to be represented by an experienced tax attorney. The Offer in Compromise application process generally requires the taxpayer to submit a substantial amount of financial information and documentation about themselves under penalties of perjury. An Offer in Compromise that includes false information can result in a referral for criminal investigation, which can result in a criminal conviction, which can be a felony.
Once the Internal Revenue Service agrees to process the Offer in Compromise, the next step is to reach a settlement with the agent assigned to evaluate the Offer in compromise. This typically requires intensive negotiations along with the submission and re-submission of additional documentation. Even if an Offer in Compromise is initially rejected, on certain occasions, the rejection can be successfully appealed. Our office strives to negotiate the lowest payment amounts that the Internal Revenue Service will accept in an Offer in Compromise.
If you do not qualify for an Offer in Compromise or your Offer in Compromise was rejected by the Internal Revenue Service, your next best option may be to resolve your tax liabilities through an Installment Payment Agreement. An Installment Payment Agreement allows you to make monthly payments to the taxing agencies to satisfy your tax liabilities. The amount of an Installment Payment Agreement that the Internal Revenue Service will agree to is determined by your outstanding liability and what the government believes you can pay. As a general rule, enforced collection actions will cease while you are enrolled in an Installment Payment Agreement.
Another thing to keep in mind is that the Federal Law generally has a ten year statute of limitation on collection, from the assessment of the taxes, with certain possible modifications that can extent this period, to collect the liability that has been assessed against a taxpayer. If an Installment Payment Agreement is entered into with the Internal Revenue Service close to the expiration of the statute of limitations, it is possible that the Internal Revenue Service will be foreclosed from collecting a taxpayer's entire tax debt before the liability has been paid in full. Our law firm reviews the records of the Internal Revenue Service and advises our clientele when the statute of limitations on collection will expire and how we can potentially use the statute of limitations to their advantage.
In certain situations where clients cannot afford to make even minimal monthly payments under an Installment Payment Agreement and they do not qualify for an Offer in Compromise, our firm may be able to negotiate a Hardship Deferral with the taxing agencies. Once a Hardship Deferral has been negotiated, no payments are required and all enforced collection activity will cease. The taxing agency may then periodically review the taxpayer's account to determine if their situation or status has changed. In some cases, the amounts owed to the Internal Revenue Service will eventually "expire" once the statute of limitations on collections has been reached.
When we undertake a matter, we do the following:
- Get to know the client and, when applicable, its officers and owners in order to provide effective representation
- Help to determine the most advantageous procedural route - settlement, conference, administrative hearing, offer in compromise or litigation – that the client should pursue
- Guide the controversy through the process of administrative appeals and/or litigation when issues cannot be resolved at the audit level
Moskowitz LLP’s tax attorneys and tax professionals have strong relationships with auditors, tax officials and public officials throughout the United States and we know how to work within the federal and state tax systems. If you have or if you anticipate a tax debt, do not wait until enforced collection activity has begun. Call us now at (415) 394-7200 for a legal consultation.
Also see: Settling with the IRS, Enforced Tax Collections