TaxProEZ

Understanding Tax Debt

What You Need to Know About Your Tax Debt:

IRS Collection Efforts …

While all debt creates anxiety and distress, tax debt can be even more
troubling, especially during challenging economic times. First, the public
perceives the power and scope of the IRS’s authority in collecting a debt.
Second, the IRS has many ways to collect past-due tax debt. For the sake of
this article, we will focus on personal debt, although the same means exist for
a business. Like any other debt, the amount of debt you owe and the ability you
have to meet that obligation weighs in on the tools at the disposal of the IRS.

Aggressive Tax Collection Efforts …

First, the IRS will look at the amount of the debt. Like any other debt
collector, they may be less aggressive in pursuing smaller amounts due to the
sheer cost of collecting those debts. However, as the size of the debt
escalates, the IRS may get more aggressive in its means and focus on collecting
the debt. The IRS has several enforcement tools to address past-due tax debt.
They can lien, levy, or seize to settle past-due tax debts.

  • Lien – A lien is simply a claim against an asset
    that secures the creditor’s place in collecting equity out of an asset. The
    most common lien is the lien secured by a bank or lending company when you take
    out a loan on your automobile or home. Similarly, the IRS can place a lien on
    your assets to secure the repayment of your tax debt. A lien will generally
    only come into play when you want to sell an asset secured by the lien. For
    example, if you have a lien against your home and you want to sell your home,
    you must settle all existing liens before you can provide a clear title to the
    prospective buyer. There is a ‘silent’ lien anytime you have a debt to the IRS.
    However, the IRS will generally file a notice of Federal Tax Lien on larger
    debts, and this lien becomes a public document.
  • Levy – A levy is an actual collection action taken by the IRS to collect tax debt and can take one of two forms:
  • Bank Levy – A bank levy occurs when the IRS
    levies funds directly from a bank (or other financial institution). Under
    Internal Revenue Code 8332 (c), the IRS must notify the taxpayer and wait 21
    days before requiring the bank to surrender the funds in the account to the
    IRS. The IRS regulations require the service to inform the taxpayer that it is
    taking this action has to allow the taxpayer time to challenge the levy.
    Ensuring the IRS has your correct address on file is essential to avoid
    surprise levies.
  • Wage Levy – The IRS can impose A wage levy on
    wages, salary, or other income, including income received as non-employee
    compensation. Unlike the bank levy, which is a singular event, the wage levy is
    a continuing levy against income. The Internal Revenue Manual states, “The
    term salary or wages includes compensation for services paid in the form of
    fees, commissions, bonuses, and similar items.”
  • Seizure – Under certain circumstances, the IRS
    may, at its discretion, determine the most effective way to settle a tax debt
    is to seize certain assets and sell them to offset the tax liability. Seizure
    is generally considered a last-ditch effort to collect taxes and is very slow
    and cumbersome. It typically signals that the taxpayer has failed to make any
    reasonable effort to settle their tax debt through other means.

Where The IRS Begins …

It is important to note that the IRS makes every effort to contact the
taxpayer and make other arrangements to resolve the tax debt before entering
into these collection processes. However, if the IRS cannot reach the taxpayer,
they have the means and the authority to pursue this collection avenue.

If you have a tax debt with the IRS, your best action is to be proactive.
You will have more options if you take the time to identify your debt amount
and discuss your options with a skilled tax resolution specialist before the
IRS reaches out to you. In many cases, there are simple steps you can take to
address your tax debt within your ability to pay.

Where You Need to Begin …

Your first step is quite simple. Go to the IRS website and access your IRS
Account to determine what you currently owe. On the IRS.gov website, you will
see a link to “Get Your Tax Record.” You will want to download your account
transcripts for the past ten years. If you are married, your spouse will have
to do the same.

If you do not already have an account, you can set one up within minutes.
Please note that you will need a credit card and a cell phone listed in your
name to create this account. We can download your tax transcripts for free if
you do not have both items.  

If you have a tax debt with the IRS, your best action is to be proactive.
You will have more options if you take the time to identify your debt amount
and discuss your options with a skilled tax resolution specialist before the
IRS reaches out to you. In many cases, there are simple steps you can take to
address your tax debt within your ability to pay.

Your first step is quite simple. Go to the IRS website and access your IRS
Account to determine what you currently owe. On the IRS.gov website, you will
see a link to “Get Your Tax Record.” You will want to download your account
transcripts for the past ten years. If you are married, your spouse will have
to do the same.

If you do not already have an account, you can set one up within minutes.
Please note that you will need a credit card and a cell phone listed in your
name to create this account. We can download your tax transcripts for free if
you do not have both items.

In Conclusion …

Don’t let tax debt dictate your financial future. At TaxProEZ, we’re your
partners in resolving tax debt challenges. Our team of seasoned experts is
committed to ensuring you regain financial freedom and peace of mind. Reach out
to TaxProEZ today, and take the proactive step towards a debt-free tomorrow.
Your journey to tax debt resolution starts with us – let’s tackle it together.

 

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