Tag Archive for Venar Ayar

What Property Is Exempt From IRS Seizure?

The IRS can seize many different types of property, including bank accounts, wages, and retirement accounts. However, some items are specifically exempt from IRS seizure under federal law.

The following types of property can’t be seized by the IRS under any circumstances:

  • unemployment benefits
  • certain annuity and pension benefits
  • certain military service-connected disability payments
  • workers’ compensation benefits
  • certain public assistance payments
  • income for court-ordered child support payments
  • necessary schoolbooks and clothing
  • certain amounts worth of fuel, provisions, furniture, personal effects for a household
  • certain amounts worth of books and tools for trade, business, or professions

In addition to these payments and assets, a portion of your wages from each paycheck is exempt from seizure. The exempt amount is calculated based on your filing status and number of dependents. Your wages above this amount can be seized continuously until your tax debt is paid off.

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Written by | Posted in TaxConnections

Understanding IRS Penalty Abatement And Reasonable Cause

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IRS Penalty Abatement And Reasonable Cause

Being assessed a penalty by the Internal Revenue Service can be an overwhelming situation. Faced with potentially massive penalties a taxpayer’s financial future may seem bleak. Fortunately, there may be relief available. The IRS offers qualified taxpayers something called “penalty abatement.” But, what is and how is it determined? To provide you with some knowledge of the process, here is our guide to understanding   IRS penalty abatement and reasonable cause.

What Is IRS Penalty Abatement?

When the IRS slaps taxpayers with a penalty for failing to file or failing to pay their federal taxes, there are certain steps the penalized party can take to resolve their issues. One of these is penalty abatement. The IRS is willing to consider any sound reason why a taxpayer failed to file a tax return, make a deposit or even pay any past-due taxes. Simply having a lack of funds is inadequate for claiming an abatement. The reasons behind the lack of funds, however, may be considered.   These circumstances are called “reasonable cause” and include:

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How To Handle An IRS Summons

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How To Handle An IRS Summons

Before receiving an official IRS summons, you may receive several other notices, including an Information Document Request. The IRS begins by asking you for the information nicely, and issues the summons when you fail to comply.

The official summons can be used to request documents or require your testimony. Summons can also be issued to third parties requesting information about another taxpayer.

Complying With The Summons

Summons present a difficult issue because you can be charged with contempt (after a court order is issued to enforce the summons) if you don’t comply. However, you also don’t want to hand over any information to the IRS that you don’t absolutely have to.

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Written by | Posted in How To Handle IRS Summons • TaxConnections

When Will The IRS Withdraw A Notice Of Federal Tax Lien?

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What Is The Difference Between A Federal Tax Lien And A Notice Of Federal Tax Lien?

There’s an important distinction between the federal tax lien and the Notice of Federal Tax Lien. The federal tax lien automatically applies to all of your property when you fail to pay taxes after a demand for payment. The Notice of Federal Tax Lien is an official record that gives the public notice of the lien.

The Notice of Federal Lien needs to be filed with state or local authorities, such as the country recorder of deeds. When the IRS removes the notice from public records, it is referred to as a “withdrawal.”

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How Is IRS Interest Calculated?

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How Interest is Determined

When you’re late filing or paying your employment taxes to the IRS, penalties and interest charges will be will be triggered and assessed. Navigating the waters of IRS tax code can be an extremely tricky proposition – thankfully, we have compiled a helpful guide to understanding how the IRS calculates interest. Keep reading to find out more.

Late Filing/Failure to File Penalties

Late filing penalties are assessed on those who tax but did not file on time. These are also known as “Failure to File.” According to IRS regulations, the penalties are assessed and added to your tax bill.  It should be noted that any assessed penalties are in addition to the tax originally due, as well as the interest on the past-due tax. Penalties for late filings are generally 5% of the owed bill for each month, up to five months (or, 25%). If your tax return is over 60 days late, the minimum penalty assessed is the lesser amount of either $100 or 100% of the tax owed.

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How The IRS Proves You Have Committed Tax Fraud

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Methods of Proof of Tax Fraud

When the IRS decides to pursue a criminal tax investigation into a taxpayer, it is typically because they believe said taxpayer has committed some sort of tax fraud. Usually that is underreporting of income, overstating their deductions, or not reporting certain income at all.  In order for the IRS to prove their case they use specific methods to analyze the situation.  They use either direct or indirect methods of proof.

Direct Methods of Proof

Initially, when trying to determine if tax fraud occurred, the IRS may rely on direct proof or specific items to prove their case rather than looking at the taxpayer’s entire financial picture.  Here, they pick apart specific transactions to see if the taxpayer earned more money than they reported on their tax returns (mostly).  They could also be out to prove that the taxpayer claimed deductions, expenses or credits that they shouldn’t have.  The IRS will typically interrogate those closest to the taxpayer or anyone who might have direct knowledge about the issue at hand such as their spouse, their accountant (remember, whatever you share with your accountant is NOT privileged), their employees, etc.

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How IRS Audits Can Become Criminal Investigations

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In our day-to-day lives, one usually has to try to find himself (or herself) on the wrong side of Law Enforcement.  That is of course, not counting basic traffic infringements (which are hardly considered criminal).  But in all other respects, it is mostly pretty easy to go about our day and not unwittingly become the target of a criminal investigation.

Unfortunately, that is not the case with the IRS. As if they weren’t terrifying enough when they were just wearing their “civilian” hats, they become infinitely worse when dealing with the IRS Criminal Investigation Division (CID).

From Regular Tax Audit to Criminal Investigation

Shockingly, it is very common for one to be completely unaware that they have become the target of a criminal investigation by the IRS until they come knocking, and catch you with your pants down.

In fact, oftentimes they can be tipped off by the civil agent who conducted your audit if he or she stumbles upon something they deem to be suspicious in nature. They can then alert the CID which in turn triggers the investigation.  In the meantime, however, they are under no obligation to inform you that they have set all this in motion (and probably won’t).  And what’s worse, at this point, they will likely even suspend their audit without even an explanation.  And you’ll be relieved, celebratory even, assuming that the audit is simply over.

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Written by | Posted in IRS Audit • Venar Ayar

How To Stop An IRS Levy Before It Begins

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How The IRS Begins The Seizure Process

In 1942, the U.S. government asked noted director Frank Capra to make a propaganda film that convinced a skeptical American public that waging war against both Japan and Germany was a good idea. Prelude to War: Why We Fight was one of several such movies that Capra made during World War II. The four-plus years he spent with the Army cost him dearly, as he had trouble finding work when he returned to Hollywood. Much like the government had to lay some groundwork before sending troops overseas, the IRS must lay some groundwork before it sends a levy notice.  Continue reading to find out how to stop an IRS levy before it begins.

Key Pre-Levy Considerations

A bank levy is the collection procedure of last resort. Unlike tax liens and some other procedures, levies are not automatic. The IRS only proceeds with them if:

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Common Mistakes Taxpayers Make When Entering Into An IRS Installment Agreement

Venar Ayar, Tax Defense Attorney
If you the IRS back taxes, an installment agreement may be the way to go.  They are easy to set up, easy to get approved for, and if you set them up right – easy to stay compliant with.  However, in spite of all of this, people still make mistakes with their installment agreement that cause them to default and land them back into collections with the IRS.  So we decided to outline some of the most common mistakes people typically make when entering into an IRS installment agreement and ways to avoid them.  Here they are.
1.) Agreeing to Pay More Than They Can Afford

This is a mistake, as tax pros, that we see often. I am not sure if it’s people’s natural fear of the IRS or maybe they’re overeager to pay off their tax debt but for whatever reason, when setting up their installment agreements, people tend to agree to pay way more (per month) than they can afford.  As someone who deals with the IRS on a daily basis, I can tell you that if you are afraid of the IRS and think that you need to agree to pay more or otherwise they may hound you, you need to take that fear and that belief and throw it in the garbage where it belongs.  At the end of the day, when you are dealing with the IRS, you are really just dealing with other humans.  They aren’t robots without feelings.  They are not out to get you.  And they understand that people make mistakes.  They want to help (as long as you haven’t done anything illegal of course).  And if you go to them and explain “yes, I know I made a mistake but I would like to rectify that,” they will do everything in their power to help you.  That includes setting up a payment plan that works for you.  So before you make that call, sit down and take a look at your monthly expenses and income and really do the math and think about a reasonable amount you can afford to pay them each month and still afford to get by.  If you can’t afford to pay them anything, then you probably qualify for Currently Not Collectible (CNC) status and you should look into that instead of an installment agreement.  At the end of the day, the IRS will just be happy that you have taken steps to remedy the situation – however much you decide to pay each month.

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Written by | Posted in IRS Installment Agreements • Venar Ayar

When To Request A Collection Due Process Hearing

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What Is A Collection Due Process Hearing?

A collection due process (CDP) hearing gives you one last chance to avoid a federal tax lien or tax levy. You will know you have a right to request a CDP hearing because you will receive a CDP notice. This notice is sent when any of the following IRS collection actions are being taken:

  • Filing of a Federal tax lien
  • Bank account levy
  • Jeopardy Levy
  • Levy on Your State Tax Refund

The IRS should send you this notice before taking the proposed actions, but there are some situations where they can send the notice of taking action. The important thing to note is that you have 30 days from the date of the notice to request a CDP hearing.

Request A Collection Due Process Hearing

By requesting a CDP hearing, you temporarily avoid the lien or levy. The IRS will typically not initiate the levy during the CDP hearing process. This gives you time to weigh your options.

The IRS is going to continue to pursue collection unless you give them a viable alternative. It’s always better to negotiate before they levy your assets than after.

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IRS Jeopardy Levies: The Silent Killers

How Can a Jeopardy Levy Place You In Jeopardy?

As we have discussed in some previous posts, IRS levies are usually attention-getting tools as opposed to collection tools. The Service almost always cancels bank and other levies if the taxpayer enters into a repayment or other plan. But if the IRS suspects that it will have no other opportunity to collect the tax due, it may use a no-notice levy and immediately seize the taxpayer’s assets. The taxpayer will have no idea that anything is amiss until the waiter quietly says that “there is a problem with your debit card.”

Your Rights in a Jeopardy Levy Case

Typically, the IRS must provide a 30-day notice before it levies the taxpayer’s available assets. Furthermore, it must thoroughly document the need for this levy. Usually, there must be sufficient evidence that the taxpayer has been completely uncooperative. But according to Internal Revenue Manual 5.113, in some cases, the Service may pursue a no-notice levy after only a cursory assessment, if it has a reasonable basis to believe that a levy is the only way it can collect the tax debt. The underlying statute does not set the reasonableness standard, so courts usually rely on a separate provision that authorizes a no-notice levy if there is evidence of:

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How IRS Payment Plans Work

IRS Payment Plan

When it comes to setting up an IRS payment plan, there are a few options to choose from. In general, the type of arrangement you can obtain depends on the amount of taxes that you owe and how quickly you are able to pay. Let’s take a look at the different kinds of tax payment plans that are available through the IRS.

Individual Installment Agreement

This payment plan applies to individuals who owe $50,000 or less in income tax, interest, and penalties (combined). With an installment agreement, you can make regular monthly payments over time. Payments can be made through Direct Debit (from your bank account), check or money order, credit card (online or by phone), EFTPS (Electronic Federal Tax Payment System), payroll deduction (from your employer), or an Online Payment Agreement (OPA). When you set up an installment agreement, make sure you will be able to make the monthly payments without defaulting. Defaulting on your loan can not only hurt your credit, but it can also lead to your installment agreement being invalidated.

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Written by | Posted in Internal Revenue Service • Venar Ayar
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