IRS Debt Collection

Should You “Trust a Tax Attorney Now”?

Tom

If you are wondering whether you actually need a tax attorney now,

right now, then I invite you to schedule a 20-minute phone call

with me where I can answer that question for you.

☎ Schedule with Attorney Groth

Don’t Let Tax Attorney Now “Psych” You Out.

I’m a pretty big Corbin Bernsen fan. He plays a pretty likable Henry Spencer on Psych, and he speaks with a lot of authority. He’s no Alan Thicke, but he does a pretty good job promoting “Tax Attorney Now”on its late-night (and daytime?) ads. (Apparently Corbin Bernsen also played an attorney on TV in “LA Law.”)

I do and I don’t wish I could afford the ads that “Tax Attorney Now” and Optima Tax Relief run on a regular basis. It would be nice to try and operate a tax resolution business on that kind of scale, but it almost never ends well. (See Tax Masters, JK Harris, Tax Lady, et al.)

Tax Attorney Now is not an actual Tax Resolution Company

Tax Attorney Now is not a tax resolution company like Optima. Instead, Tax Attorney Now (and other companies like it) simply gather leads for tax resolution “firms” throughout the country. The most disturbing part is that Tax Attorney Now has decided that it is OK to refer callers to non-Attorneys, simply by redefining “Tax Attorney” to mean “pretty much anyone.”

Continue reading “Should You “Trust a Tax Attorney Now”?” →

When do you have to file for a Collection Due Process hearing?

Tom

30 Days. That’s how long you have to file for a Collection Due Process hearing in response to a Levy notice from the IRS.

It used to be that the IRS was issuing – for the most part – only a “Final Notice of Intent to Levy and Your Right to a Collection Due Process hearing” (Letter 1058) as the last letter before a taxpayer was exposed to a levy/garnishment of all of his assets and income. But recently, the IRS has started issuing a letter called a “lt11” – which it is pretending on its website is the same thing.  It is not. That letter (the lt11) is titled [notice of intent to levy] Intent to seize your property or rights to property. Nothing in the lt11 suggests action in the same way as the words “final notice” or “your right to a collection due process hearing,” in the Letter 1058, But I guess that’s the point. So be careful(!) and read every(!) certified letter you receive from the IRS. You might have a limited time to act before your property and income is exposed. If you would like me to review a recent notice you have received from the IRS, that is something I do that during all of my free consultations.

Click the call button below to call me now or schedule online.

or just email: groth@tom.tax

or call: 203.628.2952

 

 

 

 

///Start boring Tax Procedure Section///

Yesterday, Keith Fogg wrote a blog article over at Procedurally Taxing about the recently decided Ziegler case. In that case, the Tax Court was faced with the question of whether it had jurisdiction over a case when the IRS allowed an Appeals hearing to proceed as if it were a timely requested Collection Due Process hearing. Ziegler requested a Collection Due Process hearing by mailing the request to the IRS on July 14, 2011. Critically, this request was mailed 31 days after the date on the IRS notice giving Ziegler a right to the hearing(June 13) and 34 days after the date the FNOITL was mailed (June 10). At the end of the hearing, a Notice of Determination was issued by IRS, when the IRS should have actually issued a Decision Letter. Both of these letters have largely the same effect from an administrative perspective – they represent the decision made by IRS Appeals (generally, whether or not to proceed with the levy, or enter into an agreement with the taxpayer for a “collection alternative”).

The Court decided that it had jurisdiction over the case, because Ziegler’s Tax Court Petition was timely filed in response to a Notice of Determination. However, the Tax Court went on to convert the Motion to Dismiss for lack of jurisdiction to a Motion for Summary Judgment and granted it.

//end boring tax procedure section//

What does this case tells us about the IRS Collection Process?

Despite the boring “tax geek” flavor of this case, what it tells us about the IRS Collection Process in the context of a Final Notice of Intent to Levy is instructive.

If the IRS sends you a Final Notice of Intent to Levy (AKA a FNOITL aka cp1058 letter aka NOIL aka NIL), you have the opportunity to file for what is known as a Collection Due Process hearing. In order to file for a hearing with IRS Appeals, and retain the benefit of Tax Court review,  you have 30 Days to respond to this notice by requesting a hearing.

Benefits of timely requesting a CDP Hearing

The IRS can’t collect until the hearing is over

Filing for a Collection Due Process hearing on time has its benefits. First, the IRS is prohibited by statute from taking levy action against a taxpayer while the hearing is pending. In the Ziegler case, the FNOITL was sent on June 13, 2011 and Ziegler mailed a request for a hearing on July 14, 2011, but it wasn’t until over a year later – on September 28, 2012 – that IRS Appeals actually issued its “Notice of Determination.” This means that for the 14 months that Ziegler’s CDP hearing was pending the IRS could not collect against him for the year at issue. (Now in this case, the IRS actually could have collected against Ziegler if someone at the IRS had realized he had actually filed for an Equivalent Hearing (EH), but I’ll get to that in a minute).

14 Months is not an exceptional amount of time to wait for IRS Appeals to issue a determination letter or notice of determination when a hearing is requested. Taxpayers should realize that while the delayed enforced collection is a good thing for their bank accounts and paychecks, interest and penalties will continue to accrue while the Appeal is pending.

The IRS Appeals decision made in the context of a CDP hearing is subject to review in Tax Court

Not only is a timely filed CDP hearing an effective way to shutdown the IRS Tax Machine, but the decision made by IRS Appeals is subject to review in Tax Court. This is important from two perspectives – some argue that Settlement Officers (IRS Appeals employees who hear CDP/EH cases) take CDP hearings more seriously than EH cases and are more careful to consider the arguments made by a taxpayer or her representative. This is especially a factor when the representative is a Lawyer or USTCP who can actually file the Tax Court petition when necessary. It is also important for the more obvious reason – it gives taxpayers a second shot at arguing their case in a forum that is even more removed from IRS Collections than IRS Appeals. But, something to keep in mind is that the standard of review in Tax Court for CDP cases is “abuse of discretion,” which is a very high hurdle. Taxpayers usually lose CDP cases in Tax Court.

Since a CDP hearing is subject to review in Tax Court, Collections is held at bay for an even longer period of time. In Ziegler, the Tax Court issued it’s decision on November 4, 2014. That means IRS Collections had to wait over three years to actually issue that levy it warned Ziegler about in the FNOITL. Again, in this case, if the IRS Appeals agent had realized sooner that s/he should have issued a “Decision Letter” instead of a “Notice of Determination” this delay in collection would not have taken place at all.

 

Downsides to timely filing a CDP Hearing

CDP hearings should never be submitted for the purpose of delay alone. This is for two reasons: the request is actually invalid if it is made solely for the purpose of delaying collection, and there is really no point in filing for a CDP hearing if you know you have no arguments to make. Why bother?

There are a few procedural downsides to timely requesting CDP Hearings:

The CSED (the time the IRS has to collect the tax from you) will increase

It is true that the IRS is prohibited from collecting taxes from a taxpayer when a CDP hearing is pending, but the flipside is that the in exchange for the delay of this collection, the IRS will have more time to collect. Generally, if you don’t take steps to stop the IRS collection clock, then the IRS only has 10 years from the date of assessment to collect a tax. (Certain other exceptions exist, but I won’t get into them here.) So, let’s just say that Ziegler hadn’t missed the filing deadline for the CDP hearing, and this case had proceeded to trial. The IRS would now have an additional 3+ years to collect his tax debts from him.

(Interest and penalties continues to accrue, so Ziegler’s tax debt is now much higher than it was in 2011 as well – something to consider.)

The time YOU have to wait to file for bankruptcy will increase

There are several rules to the dischargeability of tax debts in bankruptcy. I won’t get into them here. If you want to know more about them, contact me. Let’s just say that if you file for a CDP hearing, the time you have to wait to file for bankruptcy on the particular tax debt will increase as well.

 

There may be a better option

Equivalent Hearings are basically CDP hearings that are filed late. Filing for an EH has zero impact (it does not stop the clock) on the expiration (CSED) of your tax debts. Equivalent hearings, like CDP hearings, allow you to make your case for a Collection Alternative to someone who’s job it is to consider the merits of your arguments, and who isn’t also tasked with collecting taxes from you.

The IRS is not legally obligated to put off levy action when an Equivalent Hearing is filed, but it generally will. The biggest upsides to filing for a EH instead of a CDP is that the clock on the expiration of your tax debt continues to run, and you might  also be able to discharge those debts in bankruptcy sooner. The biggest downside is that there is no Tax Court review for EH hearings. This might encourage IRS Appeals to abuse its discretion, but it probably won’t.

Getting Rid of a Tax Lien

Tom

Looking to get rid of a Tax lien through a lien release or lien withdrawal?  Call 860-4THE-LAW to be connected directly to a real, live, Tax Attorney. Click “Call Now” below to call, send me a message, or schedule a phone consultation.

 

If you owe money to the federal government, the IRS will often place a tax lien on your personal and real property. That lien is piece of paper filed by the Internal Revenue Service with your local  and/or state government. The purpose of an IRS lien is to give the government priority in your stuff.  A tax lien should not be confused with a tax levy. A lien protects the government’s interest in your property, but a levy (garnishment) involves the government taking your property. If the IRS issues a levy, they will either empty your bank accounts, garnish your wages, or sell your house or other property to collect from you.

How an IRS Tax Lien Hurts

An IRS tax lien can hurt you by making it difficult for you to obtain credit, this will make it tougher to buy a home, a car, take out a personal loan, or get a job. Tax liens make it harder to live. Get some Tax Help in Connecticut! Give me a call today.

There are only a few ways to get rid of a tax lien

You may be able to get a lien released or withdrawn by:

  • Paying your tax bill in full,
  • Getting the IRS to accept an Offer in Compromise
  • Entering into an Installment Agreement (in some cases)
  • Filing for bankruptcy (in some cases)
  • Paying a portion of the tax due and suing for a refund in district court (some cases)
  • Waiting for the collection statute (CSED) to expire (10 years)
  • or, Filing an appeal with the IRS if the lien was filed by mistake or is impacting your ability to earn a living (in some cases)

If you are trying to deal with a tax lien – or if you are worried that one will be filed against you, I urge you to contact me today to discuss. I am a Connecticut Tax Lawyer, but I take on the IRS for clients throughout the United States.

The best time to fight a lien is before it is filed. But when that is no longer an option, the best thing to do is to seek professional advice to resolve the problem. When a lien is filed – that’s usually a sign that levies are on their way. A lien filing provides you with the opportunity to request a hearing with IRS Appeals to protest the lien.  Contact me today to make sure that your due process rights are protected. Need Tax Help, and live in Connecticut? Just give me a call. You will speak directly to me, and the first consultation is free.

It’s time to put your IRS problems behind you. I am here to help make that happen.

What is a 4180 Interview? The Trust Fund Recovery Penalty

Tom

Business owners incorporate or form LLCs to limit personal liability. But don’t think that gets them off the hook for unpaid company taxes. If the company fails to pay over “trust” (payroll/excise) taxes, the IRS will try to collect it somewhere else. When 941, 940, or 720 taxes are unpaid by a company, the IRS will eventually look to key employees or owners to collect. A Revenue Officer will assess what is called a Trust Fund Recovery Penalty (TFRP) IRC § 6672(a) against any officers/owners/employees the IRS determines is a “responsible person.”

You might be surprised to find out that it isn’t only the business owner who can be found to be a “responsible person.” Right off the bat, anyone with check-writing authority is at risk of being deemed a “responsible person.” The IRS Revenue Officer (RO) requests an in-person interview with individuals who may fit the bill for a responsible person. This is called a 4180 Interview.

Have you been asked to sit down with a Revenue Officer because of your company’s unpaid payroll or excise taxes? Contact Tom Tax Lawyer

For example: A Real Estate management company has 1) several investors, an 2) office manager who pays major bills for the company, a 3) bookkeeper who arranges for the filing and payment of taxes, and a 4) secretary who opens the mail and pays smaller invoices. The manager, bookkeeper and secretary all have signing authority. The IRS will consider all three of them as potential responsible persons. Depending on the facts of the case, the RO may or may not pursue the investors.

The basic idea is that if you have the authority to decide who to pay first, and you decide to pay other creditors or vendors before paying the IRS, then you should be held responsible for it. If the IRS decides that multiple parties are responsible, then it can try to collect the entire amount of the Trust Fund Penalty in full from each responsible person. Because of this Joint-and-several liability, the IRS has every incentive to find as many “responsible persons” as possible. See what the IRS Manual has to say about Trust Fund Recovery Penalties here.

If the IRS requests a 4180 interview with you, you should retain your own lawyer to guide you through the process and advocate for you during the 4180 interview. Many times when a company gets into hot water with the IRS, the officers and high-level employees will seek joint representation. While this has the advantage of saving them money – it may cause a conflict.

Why “Tom Tax Lawyer” and not “Tom Tax Attorney”?

Tom

It really comes down to the industry that I find myself surrounded by. An industry of Tax Resolution firms that do EVERYTHING short of saying they are Attorneys to imply that they are attorneys. They will call themselves “Tax Firms,” but they don’t employ attorneys – they employ Enrolled Agents and – sometimes – CPAs. Occasionally “Tax Firms” like these will even employ an attorney or two.

But they still aren’t law firms. They will say that they are “licensed by the IRS as power of attorney in all 50 states!” This is not misleading on its face, but it can be for those not as familiar with the terms of art commonly thrown around in the tax resolution industry (or in the legal world in general. An “attorney in fact” is not – in fact – an attorney.) See, properly accredited Enrolled Agents can represent taxpayers in all 50 states in front of the IRS by filing a 2848. But if an Enrolled Agent is the founder of a tax resolution firm, it is not a law firm. 

Well look – I don’t want to cause any confusion. I am an attorney, licensed in the State of Connecticut. IRS Circular 230 allows attorneys to represent taxpayers all over the country in front of the IRS. I am also admitted to Federal Tax Court. With the exception of a small handful of Tax Practitioners, only attorneys can take your IRS tax case all the way to Tax Court. And only an Attorney can bring a refund claim in District Court, where I am also admitted.

I like “Tom Tax Lawyer” better than “Tom Tax Attorney” because there is no room for error. There is no room for confusion. My job as a lawyer is to make things less confusing, not  more confusing.

Keep in mind that Enrolled Agents and CPAs can be forced to testify against you in a criminal proceeding. A tax lawyer cannot be forced to testify against you. I still file the same IRS Power of Attorney that an Enrolled Agent or CPA would file. But I am equipped to go the distance if necessary. And believe it or not, the IRS knows that.

IRS Debt collection procedure compared to the procedure followed by a general creditor.

Tom

 

A general creditor needs to go to court and get a judgment before he can take collection action against a debtor.  In addition, a general creditor is unsecured until he obtains a judgment lien in his favor.  The IRS has broad collection powers.  In order for the IRS to collect a tax debt, the debt must first be assessed.  The assessment of a tax liability creates a collectible liability with the force of a court judgment obtained by a general creditor that allows the IRS to take necessary collection action.  Collection action includes: levying bank accounts, garnishing wages, and seizing (levying) real and personal property.  In order for a taxpayer to obtain judicial review of a tax that has been assessed, he must generally pay the tax and file a petition in district court or the court of federal claims.

Even when the IRS sends a notice of deficiency, a taxpayer is the party who is tasked with bringing the issue in front of a court.  In order for a general creditor to take collection action, it must: bring an action in court, carry the burden of proof that the debt is owed, prove that the creditor is entitled to payment, obtain a judgment, and collect on the judgment against the judgment debtor.  Despite the differences in presumptions and burdens that apply to a debt to a general creditor and an assessed tax liability, the collection process that the IRS follows is, in many ways, functionally similar to the way a general creditor would go about collecting a debt.  However, the differences are important because they illustrate the special powers and rights afforded to the IRS that are not available to the general creditor.

Once a tax has been properly assessed, the IRS will send the taxpayer several “dunning letters” requesting that he pay his tax liability and listing the amount of interest and penalties that have accrued on his tax liability.  General creditors also send dunning letters to debtors and attempt to contact them over the phone to collect a debt before bringing action in court.  However, when the IRS begins sending dunning letters, the tax has already been assessed.  At this point, the IRS already has the right to collect on that debt without going to court.  General creditors, on the other hand, attempt to collect a debt by issuing dunning letters before they have a secured interest in the debtor’s property.

In terms of priority, a general creditor does not have a perfected security interest in the property of the debtor until it obtains a court order that creates a judicial lien.  A tax lien is retroactive to the date of assessment, and it arises when a taxpayer fails to pay the entire tax in response to a notice and demand for payment.  A tax lien does not need to be filed in order to retain its priority against most creditors.  Because of this, it is sometimes called a “secret lien.”  The IRS does not need court approval to file a Notice of Federal Tax Lien.  Such a filing will insure the IRS’s priority over all subsequent creditors of the taxpayer.  On the other hand, a general (unsecured) creditor does not have a definite priority over other creditors until it initiates court proceedings.

Prior to trial, a court may allow a general creditor to attach the property of a debtor prior to final judgment to ensure that any judgment in the creditors favor will be paid.  Prejudgment seizure and wage garnishments available to a general creditor create a specific lien in its favor.  After final judgment, the lien is perfected and relates back to the date of the levy or garnishment.  However, even for provisional attachment before a final judgment, there still must generally be a pre-seizure hearing (sometimes a post-seizure hearing is enough).  The IRS, on the other hand, has a lien in its favor on all of the taxpayer’s property and rights to property by operation of law once a taxpayer is sent a notice and demand and fails to pay the tax liability.  A taxpayer can request a Collection Due Process hearing in response to a Notice of Federal Tax Lien Filing and a Notice of Intent to Levy.  Filing for a Collection Due Process hearing prevents the IRS from taking collection action on the Taxpayer’s property until the CDP proceeding is over.  However, a request for a CDP hearing will not stop the IRS from filing a notice of federal tax lien.  As soon as this notice is filed, the IRS is perfected against (and has priority over) unperfected creditors of the taxpayer.  On the other hand, a general creditor will not be perfected in his specific lien on the property of a debtor seized prior to a final judgment.

The IRS can sell property it has seized from a delinquent taxpayer provided that the taxpayer is provided with notice; it is not required to obtain a court’s permission to do so.  On the other hand, even after a general creditor has obtained a final judgment, the judgment must first be docketed and a writ of execution must be issued by the court clerk.  When selling a debtor’s property subject to its judicial lien at a sheriff’s sale, a creditor is usually required to have the property appraised.  The IRS is only required to determine a minimum price, but this price is not necessarily the value of the property.  After the property is sold, both the debtor and the taxpayer will have a certain period of time (prescribed by law) to redeem/repurchase the property.