Do you owe the IRS or State Tax Commission?  Are you facing a tax lien or Levy?  You have several options to deal with your individual tax debt.

Wage Levy or Bank Garnishment

An IRS levy is when the IRS issues a bank levy to obtain your cash in savings and checking accounts. The IRS can also levy your accounts receivable, your IRA or your 401(k).  When the IRS levies a bank account, the levy is only for the particular day the levy is received by the bank. This type of levy does not affect any future deposits made into your bank account, unless the IRS issues another bank account levy.

Individual Tax Debt

An IRS wage levy is different from a bank garnishment.  Wage levies are filed with your employer and remain in effect until the IRS notifies the employer that the wage levy has been released. An IRS wage levy will take most of your wages.  Levies should be avoided at all costs and are usually the result of poor or no communication with the IRS.

Tax Liens for Individual Tax Debt

IRS and state tax liens act as security against all of your property, including your home, cars, furniture and other household items.  A tax lien is not a levy, it does nothing more than provide the IRS or state tax commission with a security interest in your real and personal property.

You Have several options in dealing with or reducing your individual tax debt.  They include:

  • Setting up a payment plan with the IRS
  • Making an offer in compromise to settle your tax debt
  • Filing a penalty abatement request
  • Filing an innocent spouse request

Installment Agreement with the IRS

The IRS has various levels of payment plans that they offer.  If you owe less than $25,000 you can set up a Stream Line Installment Agreement with the IRS, where the IRS doesn’t care about your financial assets or income so long as you pay off your tax debt within 60 months.  If you owe more than $25,000 but less than $50,000 you can set up a Fresh Start Installment agreement, where the IRS doesn’t care about your financial assets or income so long as you pay off your individual tax debt within 60 months and set up your payment plan as an auto debit payment plan from your bank account.  If you owe more than $50,000 then you will need to submit a financial statement to the IRS and request a payment plan based upon your finial ability to pay.

Offer in Compromise

The ultimate goal of an offer in compromise is to reach a settlement with the IRS that is in the Government’s and taxpayer’s best interest. An Offer in Compromise based upon doubt as to collectability means that it is unlikely that the IRS will be able to collect the full amount you owe and you are willing to pay the IRS what they would reasonably collect from you.  In determining how much you have to pay in an offer, the IRS considers first the amount of collectible equity you have in your assets and second the amount you could pay from your present and future income. Generally, the IRS will not accept an offer unless all of your tax returns have been filed.

IRS Penalties

The IRS penalizes millions of taxpayers each year and taxpayers often find out about IRS problems years after they have occurred.  The most common penalties are-Failure to File and Failure to Pay penalties. IRS Penalties can substantially increase the amount you owe the IRS, and to make matters worse, the IRS charges you interest on penalties.  While the original goal of penalties was to motivate taxpayers to timely file and pay their taxes, penalties have turned into additional sources of income for the IRS.  The IRS does abate penalties and before you pay the IRS any penalty amounts, you may want to consider requesting an IRS penalty abatement.

Innocent Spouse

Married taxpayers who file a joint tax return are individually and jointly held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits.  This means that the IRS can collect against you as an individual and you and your spouse as a couple.  This liability remains even if you later divorce and your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns.  In some cases, a spouse can get relief from joint and several liability under the innocent spouse provisions.   You must request relief no later than 2 years after the date the IRS first attempted to collect the tax from you, regardless of the type of relief you are seeking.