Home Magazine Publishing Company Do you have unpaid taxes? If so, you need to know how to manage privileges and levies

Do you have unpaid taxes? If so, you need to know how to manage privileges and levies


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At the start of the pandemic, the IRS threw the American people a lifeline when it suspended all liens, levies, and seizures in an effort called the “People First Initiative.” But that moratorium ended on July 15, 2020, and many Americans who may have counted on it are wondering what to do if they’ve had trouble paying their taxes (or expect trouble after one of the most difficult years for personal finances in the United States). the story).

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Levies are liens are complicated tax terms – so what do they mean? According to the IRS website, a levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a legal claim on your property to secure payment of your tax debt, while a levy actually takes the property to satisfy the tax debt. A federal tax lien arises when the IRS assesses a tax against you and sends you a bill that you neglect or refuse to pay. The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal claim to your property. You have the right to appeal if the IRS notifies you of an intention to file a notice of federal tax lien.

In the data compiled by Solvable and GOBanking Rates, over the past 10 years, the IRS has filed 7.3 million liens against taxpayers. This number peaked in 2010, with 1,096,376 tax liens filed. Since then, the number has steadily declined year over year, dropping 50% by 2019. In 2019, for the first time in 8 years, the number of tax liens filed exceeded the previous year.

This decline in tax liens filed in 2011 coincided with the introduction of the Fresh Start program, which changed the process for filing federal tax liens, according to Solvable and GOBankingRates. Under this program, the IRS can only file a tax lien against taxpayers who owe $10,000 or more.

Additionally, the IRS will not file a lien against those who owe less than $50,000 and have a simplified installment agreement in place to cover their balance owing; and it also helps taxpayers manage existing tax liens.

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To discover: What is a tax levy and how can you prevent it?

In a July 10, 2020 memo to all debt collectors regarding the expiration of the People First initiative, Fred Schindler, director of collections policy for the IRS, said that while the suspension period of the PFI may end, operations “will not immediately return to pre-pandemic normal.

“We first need to work on the backlogs in processing incoming mail and sending outgoing notices. There will be special considerations regarding meetings with taxpayers and practitioners at IRS offices or in the field,” he wrote in the memo. “Finally, when initiating enforcement actions, we must exercise good judgment in recognizing that some taxpayers have been significantly impacted by economic factors caused by the COVID-19 pandemic,” he added. “The Internal Revenue Manual provides employees with the authority and discretion necessary to appropriately handle unusual situations and situations where taxpayers experience economic hardship. »

According to Tax Fortress, individuals should be more vigilant about whether they are taking appropriate steps to settle their tax balances since the suspension was lifted. “In particular, for people with large tax liabilities, the IRS has not shown compassion since the moratorium on withholdings ended on July 15,” says Tax Fortress.

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But there are several options for paying outstanding tax debts that may apply after the IRS suspension ends.

One such solution is federal programs called the Offer in Compromise, which allow taxpayers to settle their tax liability for less than they actually owe. The IRS states on its website that this may be a legitimate option if you cannot pay all of your tax payable or it creates financial hardship. The IRS considers a unique set of facts and circumstances, including ability to pay; Income; expenses; and equity. As of April 27, 2020, the application fee is $205.

The IRS accepted about a third of the offers in compromise it received in 2019, fewer than in previous years but more than 10 years ago, according to Solvable and GOBankingRates. Between 2013 and 2018, 40-43% of offers were accepted, while in 2009 only 21% of offers were accepted, according to Solvable and GOBankingRates data.

Additionally, the total value of all accepted Offers in Compromise was $289 million in 2019, up from $157 million in 2009, an increase of 84%.

John Boyd, director of management consulting firm The Boyd Company, told GOBankingRates that while compromises are generally rejected by the IRS, applying is a smart move for low-income Americans.

“The application fee is not only waived if you are on a low income – but also the monthly payments while your Compromise Application is reviewed. The application process can be difficult – so using the Tax Assistance Scheme is a good idea for the poor and the elderly,” Boyd said.

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Money Crashers’ Brian Martucci echoes that sentiment, saying an Offer in Compromise is “easier said than done.” Most taxpayers don’t qualify for either,” he told GOBankingRates.

“You should definitely consult a tax professional who is familiar with negotiating with the IRS, but don’t bet on the possibility of settling – you will have to prove that the IRS will collect more from you in a settlement than in the 10 years. statute of limitations to pay outstanding tax debts,” says Martucci.

Another available option is to apply for non-collectible status, “another powerful tool available to people in financial difficulty,” according to Boyd.

“Although this is a temporary designation, typically six months to two years, it offers the ability to get rid of IRS collectors until your financial situation improves,” says Boyd. .

There’s also the option to pay in full within 120 days, says Brian Martucci of Money Crashers.

“The easiest option is to pay in full within 120 days if you can afford it. You will continue to incur penalty interest until the debt is paid, so it is in your best interest to pay the most quickly as possible, but you will not incur any additional fees or penalties if you use the time allowed,” Martucci told GOBankingRates.

Finally, there are installment plans, which “is your best bet for paying off all of your debt over a longer period of time,” says Martucci.

See: 6 things every homeowner should know about property taxes
Find: What the Top 1% Pay in Taxes in Your State

Boyd adds that most tax practitioners “advise you to set up an installment plan for the longest possible period, 72 months, with the lowest monthly payments.”

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About the Author

Yael Bizouati-Kennedy is a former full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She has also worked as a VP/Senior Content Writer for major New York-based financial firms, including New York Life and MSCI. Yael is now independent and most recently co-authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”, with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in journalism from New York University and one in Russian studies from Toulouse-Jean Jaurès University, France.