Andy Sallee

The Tale of Two Seasons: IRS Levy Season and the Holiday Season


With the holiday season literally coming upon us in a few days, there are many stresses accompanying the happy times ahead. If you owe tax debt, one of those stresses should be the IRS. IRS levies rarely put anyone into a jolly mood. However, with the holidays also comes a fever of IRS collection actions.
Coming up to the holidays and shortly after them, the IRS kicks collections into gear and are often more aggressive than normal. This is due to an informal hold that the IRS has done annually referred to as the Holiday Stay of Collections. Technically, for about three weeks around the holidays, the IRS automated collections systems will generally not levy personal accounts or wages. This is not formally announced, but as we actively work with clients to resolve issues, we normally are privy to this information through phone conversations with the IRS. While the IRS claims that they take this time to reboot their computer system for upgrades for the New Year, we know that they are actually doing a kindness in taking three weeks off from collecting against tax debtors.
This sounds great right? Yes and no. The hold is great, but surrounding it is known as the Levy season. This is because the IRS is of course aware of the hold and it is their job to collect funds. However, what we see happen more often is that all the collection actions that should have taken place during those three weeks comes like a freight train once the Holiday Stay is completed. Some people think that they won the lottery because they were warned of serious collection action through notices and then nothing happened so they assume that the IRS forgot about them. That is definitely not the case. Tax debtors beware: we are approaching IRS levy season.
Read your letters:
In order for the IRS to take collection action, they must give you proper notice. This has to be served correctly (normally through the mail). These letters also provide a guide as to when the IRS will actually levy.
The first three mean warnings only, and they are titled as follows: 1) Amount Due Letter 2) Notice and demand, and 3) Notice of intent to levy. It’s the letter that follows this that is one to take note of, the IRS Letter 1058 “Final Notice of Intent to Levy”. On this letter, there is a notice date, and the debtor has 30 days to do something before collection action is taken. If this letter is received any time in the month of November, you could assume no action will be taken in December, however, be sure that after the Stay collection action will occur.
With IRS levy season and courtesy holiday stay of collections right around the corner, now is a good time to look for help. If you have received a letter from the IRS, or if they are threatening collections, today is the day to think about what you are to do with this. When we say today, we mean today, not after you are collected upon. Collections can be stopped and prevented, and the holidays are not the time to get garnished or levied. Give us a call 619-352-4188 to see what your options are during the holidays.


How to Get Rid of the Federal Tax Lien for Good

There are a lot of people that owe tax debt to the IRS. Recently a spokesperson from the IRS stated that an estimated 8.2 million Americans owed back taxes. That’s a lot of people. Most of these people owe a minimal amount and don’t qualify for a settlement of any kind with the IRS. However, what a lot of these 8.2 million have in common can be found on their credit report. Normally accompanying tax debt is a tax lien, and this shows its ugly head on a credit report, glaring at lenders, landlords, and credit companies. So what can be done?

First, how to qualify to have your lien removed at the IRS

In order to qualify to have a tax lien removed, your balance must be paid in full, through a settlement or in full payment, or you must be in a streamlined payment plan. There are of course ways around a lien temporarily, but the focus of this article is to get it removed completely from your credit report. If you paid the balance in full, then of course the lien is eligible as there is nothing to back the lien on. If you have reached a settlement with the IRS and that settlement has been finalized and paid in full, then there is no debt remaining and therefore once again you can have the lien removed. If you owe less than $50,000 to the IRS, you can qualify for a streamlined fresh start payment plan and are protected from new liens filed and are also eligible to have your past lien removed after proof of successful payments. Therefore, in order to get the lien removed, the debt must be paid in full or you must be on the right type of payment plan.

Make the right request

While the law says that the release will automatically happen, this is not often the case. What is necessary sometimes is a request in writing to the IRS. You will want to make a request to have the release of tax lien form. Once you obtain this form, this only “releases” the lien, but it will still show on your report. Thus, the next step is normally the most important. You have to request to the IRS to “withdrawal” the tax lien. Prepare a cover letter, the right form, attach all necessary documentation, and even include some IRS publications to help guide them.

You received the Withdrawal letter, now what?

Now you have taken all necessary steps to get the balance situated, the lien removed, and the lien withdrawn. However, it is still showing up on your credit report as “removed”. It can take up to seven years to get this removed through the normal process, so you should take steps to expedite the process. Contact the three credit bureaus, dispute the lien, and provided a copy of IRS communications to make the argument that to have it deleted from your report, NOT show “removed.” Credit agencies will verify the information with the counties the lien is filed with and then should remove from credit report within 60 days.

Sounds easy enough….not really…

There are a lot of moving parts and a lot of agencies that you’ll be dealing with. There are a lot of forms to organize and complete, and some legal drafting on your request/demand letters. Even when a professional takes control, it can be removed on 2 credit agencies and not all 3 and therefore more work is needed. Luckily, we here at Tax Debt Services have had the experience in making these arguments for our clients and are familiar with the language, forms, and processes of removing a tax lien. Call 619-352-4188 to see if we can help get your credit report free from tax liens.

Thanks for Entering a Payment Plan, but We’re Still Going to Charge You Penalties and Interest

One of the worst things about owing the IRS money is that it continues to grow. Not only do you have the actual tax debt that you owe, but the IRS charges interest and it also can charge two different types of penalties. After many years, 25% of your total tax debt can be penalties. You may have entered into a payment plan and filed all missing returns, but the penalties and interest continue to grow. Let’s go through some common questions about this bad situation:

What stops interest and penalties from accruing?

The only thing that stops interest and penalties from accruing on your tax debt is to not have tax debt. That means it must be paid in full, either through a one-time payment, making multiple payments over years, or by having an offer in compromise settlement accepted and then paid in full. Beyond this, those interest and penalties will continue to enlarge your debt to the IRS.

Can you have the interest accrued waived?

Unfortunately, the answer is no. The IRS will not remove interest unless there is an extreme unique situation. However, if you have an offer in compromise accepted, it can indirectly remove the interest as that is part of the settlement. Beyond that, you will be paying back all interest accrued on the debt.

Can you have the penalties accrued waived?

Yes! Penalties accrued for failure to pay in full and penalties for failure to file can be removed. This can be done through what the IRS calls Penalty Abatement. Your penalties are there for two purposes, failure to file and/or failure to pay in full. In order to get these penalties removed, you have to show reasonable cause to the IRS of why you failed to file on time or why you failed to pay it in full.

My favorite answer to these questions is when people tell me “well…we just didn’t have the money.” Unfortunately, that is not reasonable to the IRS. The IRS is not friendly or kind, their job is to collect tax revenue for the country and if they cannot do that, they will penalize you for it. However, if there was a natural disaster, if there was a death in the family, if there was a period of sickness, then the IRS would say…”well…that’s reasonable, we’ll waive your penalties, but you’re still paying interest!”

If you are paying on your tax debt, and its been years of paying but the debt is staying solid, and you have a reason of why you owed, it may be worth your while to attempt a penalty abatement request. Give us a call at 619-352-4188 to see what our professionals think your options are.
Tax Debt Services