IRS tax debt never dies. In fact, it grows! The IRS tax debt can actually increase the original tax demand periodically on account of interest on the tax debt, penalty, etc. A very famous quote about tax debt is by great philosopher Ralph Waldo Emerson is significant “Of all debts, men are least willing to pay their taxes; what a satire this is on government.” But not paying the tax debt is not a solution because the IRS has plenty of powers, resources, and legal teeth to take what it believes is of the government.
This post is explaining in simple terms what IRS can do and what you can and should do to overcome the problem of tax debt because it is equally true that by employing a tax attorney or lawyers, you can get help with tax debt.
What IRS Can Do to Collect the Tax Debt?
Following is the list of measures that IRS can take against a tax debtor :
- Impose penalty for failure to pay the tax.
- Impose interest for failure to pay the tax debt.
- Issue a notice of IRS tax lien on the taxpayer’s property as security for the debt owed. The lien makes it difficult for the taxpayer to sell or borrow against the property until the debt is paid. The IRC code authorizing the lien is 26 USC § 6321.
- Serves a tax levy or tax seizure notice , commonly known as wage garnishment notice -on your employer, under which the employer is required to begin paying most of your salary to the IRS. Please note that once the IRS serves a levy on your employer it will continue forever, or until the tax debt plus interest and penalties (which continue to accrue), has been paid in full. Don’t ask your employer to help you out by ignoring the IRS levy. Can employer favour you by paying salary first and not paying the tax debt to IRS ? The answer is no , because as per Internal Revenue Code, if the employer doesn’t pay money over to the IRS, the employer could be held personally liable for your tax debt.
- As per section 6331 of 26 US Code, the IRS can use a levy to seize and sell any property, including wages, bank accounts, and vehicles, to collect the debt owed. The IRC code authorizing the levy is
- The IRS may foreclose on a federal tax lien and sell the property to pay the tax debt owed as per 26 USC § 7403.
- Employ a private debt collector to collect tax debt from you as authorised under 26 USC § 6306.
- Attach your state income tax refund.
- Seize and sell your assets like car or house.
- Initiate prosecution for the criminal failure to pay your taxes and send you to federal prison. However , IRS do not resort to prosecution for non-payment of tax very commonly. They have a number of debt relief programs , which they may consider first.
- If you have a business, the IRS can contact your customers, tell them that you have an IRS tax debt, serve a tax levy, and seize your accounts receivable.
- IRS may initiate process for revoking the passport issued in your name if they regard your tax debt as seriously delinquent tax debt.
What You Should Do to Settle IRS Tax Debt?
The first thing to know is that section 7521(b) of the Internal Revenue Code provides every taxpayer a right to consult an IRS tax lawyer or tax attorney. Here is the excerpt of the said provision
(2)Right of consultation
If the taxpayer clearly states to an officer or employee of the Internal Revenue Service at any time during any interview (other than an interview initiated by an administrative summons issued under subchapter A of chapter 78) that the taxpayer wishes to consult with an attorney, certified public accountant, enrolled agent, enrolled actuary or any other person permitted to represent the taxpayer before the Internal Revenue Service, such officer or employee shall suspend such interview regardless of whether the taxpayer may have answered one or more questions.
12 ways to get help with the tax debts .
For all the twelve ways for tax debt relief, you need to take the first step to find a good tax attorney or a tax debt lawyer, or tax debt & settlement service firms who can really help with tax debt issues. . The tax attorney or lawyer can suggest various steps to overcome the IRS effort to collect tax.
- Based on your situation your tax attorney can decide if applying for an Offer in Compromise is a good step. He can also determine if you prequalify for it . Pl see irs offer in compromise calculator for pre-qualifier
- The tax professional can examine the reasons for tax debt and finding if there are errors involved in a prior tax audit. If so, he may suggest filing an application for rectification of tax demands.
- Your tax attorney may requesting tax debt relief by requesting IRS for a short-term deferral of tax debt so that you can have time to get back on your feet
- He can examine if you are eligible for the IRS Debt Forgiveness Program.
- Applying for an installment payment agreement so that you can pay your IRS tax debt over as long as 10 years or more.
- Your tax attorney can examine if the statute of time limitation applies to any tax debt that IRS is trying to collect
- He may formulate plans to obtain releases of IRS tax levies.
- Your tax attorney can examine the issue whether your IRS tax debt can be wiped out in bankruptcy.
- Applying for releases of IRS tax liens on various assets and instruments ,so that you can obtain a loan to pay-off your tax debt
- Examining if the situation exist for declaring the tax debt currently uncollectible so that you can have a tax holiday from your old IRS tax debts
- Obtaining release of tax levies
- Negotiating innocent spouse relief to reduce or eliminate your IRS tax debt
- Yor tax attorney can file abatement application for interest and penalty on tax debt.
Therefore, it is advisable that in case of an IRS tax debt, help from tax lawyers or tax attorneys will go a long way to ultimately settle the ongoing and future problems emanating from IRS efforts to collect the said tax debt
While the information on this site - Internal Revenue Code Simplified-is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein.