IRS TAX PROBLEMS – How Does “Mediation” Work in IRS Tax Appeals?

IRS TAX PROBLEMS – MEDIATION

 “Mediation” is available when a limited number of legal and factual issues remain unresolved after settlement discussions in the IRS Office of Appeals. The Mediator’s role is to impartially facilitate discussion between the disputing parties to help them reach their own negotiated settlement.

A trained IRS Appeals Mediator will be assigned to your case at no cost to you. You may also elect to use a non-IRS co-mediator at your own expense.

You may request Mediation if you are already in the IRS Office of Appeals admin- istrative process with any qualifying issues, and your case is not docketed in any court.

It is available for both factual issues and legal issues. There are no dollar limitations.

Some of the cases or issues excluded from mediation are:

  • Collection issues except for those detailed in Announcement 2011-6, or subsequent guidance issued by the IRS;

  • Those not consistent with sound tax administration;

  • Frivolous arguments; and

  • Those where you did not act in good faith during settlement negotiations.

Mediation is optional and does not create any special settlement authority for IRS Appeals. You and the IRS Appeals person you’re working with may request Mediation after consulting with each other. You initiate Mediation by sending a written request to the appropriate IRS Appeals Team Manager, with a copy to the appropriate IRS Area Director and IRS Chief of Appeals.

IRS TAX PROBLEMS – What is “Early Referral” in an IRS Appeal?

IRS TAX PROBLEMS – EARLY REFERRAL

 Taxpayers whose Tax Returns are under the jurisdiction of IRS Examination or Collection may request the transfer of a developed but unagreed issue to the IRS Office of Appeals, while the other issues in the case continue to be developed in IRS Examination or Collection.

The early resolution of a key issue may encourage taxpayers and the IRS to agree on other issues in the case.

Early Referral” can also be requested with respect to issues regarding an involuntary change in method of accounting, employment tax, employee plans and exempt organizations. Regular IRS Appeals procedures apply, including taxpayer conferences

IRS TAX PROBLEMS – What is a “CAP Appeal” during IRS Collection action?

IRS TAX PROBLEMS – CAP APPEALS

 

 

The “CAP Appeal” procedure is available under more circumstances than Collection Due Process (CDP). Unlike CDP, you may not challenge in CAP the existence or amount of your tax liability. You also cannot proceed to court if you don’t agree with Appeals’ decision in your CAP case.

Collection actions you may appeal under CAP Appeal are:

         Notice of Federal Tax Lien. You may appeal the proposed filing of a Notice of Federal Tax Lien (NFTL) or the actual filing of an NFTL at the first and each subsequent filing of the NFTL. You may also appeal denied requests to withdraw a NFTL, and denied discharges, subordinations, and non-attachments of a lien.

Third parties may file a CAP Appeal regarding the filing of a notice of lien against alter ego or nominee property. There are no CDP rights available for persons determined to be nominees or alter egos. Persons assessed as transferees under Internal Revenue Code (IRC) Section 6901, however, are entitled to CDP rights.

         Notice of Levy. You may appeal before or after the IRS places a Levy on your wages, bank account or other property. Once the Levy proceeds have been sent to the IRS, you may also appeal the denial by the IRS of your request to have levied property returned to you. Please note that a request to return levy proceeds must be made within Nine (9) months from the date of such levy. You may also have additional CDP appeal rights.

         Seizure of Property. You may appeal before or after the IRS makes a seizure but before the property is sold.

         Rejection, Modification or Termination of Installment Payment Agreement. You may appeal when the IRS rejects your request for an Installment Payment Agreement. You may also appeal when the IRS proposes to terminate or terminates your Installment Payment Agreement. In addition, you may also appeal when the IRS proposes to modify or modifies your Installment Payment Agreement.

Wrongful Levy. If you are not liable for tax and the IRS has levied or seized property that you believe belongs to you or in which you have an interest superior to the IRS, you may appeal the denial by the IRS of your request to release the Levy or seizure, or return the property or its value. Please note that a request to the IRS to return wrongfully levied property must be in writing, filed within Nine (9) months of the Levy or seizure and must satisfy certain specific requirements.

IRS Tax Problems – What Can You Do With an “IRS Levy”?

IRS Tax Problems – Levy

IRS “Collection Due Process” (CDP) Appeals Hearing

 

If you just received a Letter L-1058 or LT11 “FINAL NOTICE OF INTENT TO LEVY AND NOTICE OF YOUR RIGHT TO A HEARING”. You don’t believe you owe this amount, or you can’t pay this amount. What can you do?

This IRS Letter gives you Thirty (30) days to request a Collection Due Process (CDP) Hearing to discuss the Levy before the Levy is started. You should request a CDP Hearing if you feel the Levy is inappropriate, or if you can propose “Collection Alternatives” to the IRS such as an “Installment Payment Agreement” or an “Offer in Compromise”.

In a CDP Hearing, IRS Appeals can only discuss the existence of or amount that you owe under very limited circumstances. If IRS Appeals cannot consider the underlying liability, you have Three (3) options to re-open that issue:

  • Pay the amount due in full and file a “Claim for Refund”. If the IRS disallows your Claim for Refund, you will have the right to Appeals at that time.
  • Request an “Audit Reconsideration”. Note that you must submit new information the IRS did not previously consider in order to have an Audit Reconsideration.
  • File an “Offer in Compromise, Doubt as to Liability”.

IRS Tax Problems – What is a Levy?

IRS Tax Problems – What is a Levy?

 

A “Levy” is a legal seizure of your property to satisfy a tax debt. Levies are different from Liens. A Lien is a claim used as security for the tax debt, while a Levy actually takes the property to satisfy the tax debt.

If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in. For instance, the IRS

  • could seize and sell property that you hold, or
  • could Levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).

The IRS usually Levy only after these Three (3) requirements are met:

  • IRS assessed the tax and sent you a “Notice and Demand for Payment”;
  • You neglected or refused to pay the tax; and
  • IRS sent you a “Final Notice of Intent to Levy and Notice of Your Right to A Hearing (Levy Notice) at least Thirty (30) days before the Levy, giving you the right to request a “Collection Due Process” (CDP) Hearing with the IRS Office of Appeals.

If a Levy on your wages, bank account or other property is causing a “hardship”, you should contact the IRS at the telephone number on the Levy or correspondence immediately and explain your financial situation. If the IRS determines the Levy is creating an immediate “economic hardship”, the Levy may be released. A Levy release does not mean you are exempt from paying the balance of the taxes.

Employers generally have at least one full pay period after receiving IRS Form 668-W, “Notice of Levy on Wages, Salary and Other Income” before they are required to send any funds from their employee’s wages.

You may ask an IRS Manager to review your case, or, again, you may request a “Collection Due Process” (CDP) Hearing with the IRS Office of Appeals by filing a timely request for a Collection Due Process hearing with the IRS office listed on your Levy Notice.

If the IRS levies your wages, salary, federal payments or state refunds, the Levy will end when:

  • The Levy is released,
  • You pay your tax debt, or
  • The time expires for legally collecting the tax.

If the IRS levies your “Bank Account”, your bank must hold funds you have on deposit, up to the amount you owe, for Twenty-One (21) days. This holding period allows time to resolve any issues about account ownership. After Twenty-One (21) days, the bank must send the money plus interest, if it applies, to the IRS.

 

 

IRS Tax Problems – What Can You Do With a “Federal Tax Lien”?

IRS Tax Problems – Federal Tax Lien

IRS “Collection Due Process” (CDP) Appeals Hearing

 

If you just received a “Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320”, IRS Letter 3172. You don’t believe you owe this amount. What can you do?

This IRS Letter 3172 gives you Thirty (30) days to request a Collection Due Process (CDP) Hearing to discuss the Lien filing. You should request a CDP Hearing if you feel the Lien is inappropriate, or if you can propose “Collection Alternatives” to the IRS such as an “Installment Payment Agreement” or an “Offer in Compromise”.

In a CDP Hearing, IRS Appeals can only discuss the existence of or amount that you owe under very limited circumstances. If IRS Appeals cannot consider the underlying liability, you have Three (3) options to re-open that issue:

  • Pay the amount due in full and file a “Claim for Refund”. If the IRS disallows your Claim for Refund, you will have the right to Appeals at that time.
  • Request an “Audit Reconsideration”. Note that you must submit new information the IRS did not previously consider in order to have an Audit Reconsideration.
  • File an “Offer in Compromise, Doubt as to Liability.

IRS Tax Problems – What is a Federal Tax Lien?

IRS Tax Problems – What is a Federal Tax Lien?

 

A “Federal Tax Lien” is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The Lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A Federal Tax Lien exists after the IRS:

  • Puts your balance due on the books (“Assesses” your tax liability); and
  • Sends you a bill that explains how much you owe (“Notice and Demand for Payment”); and

You:

  • Neglect or refuse to fully pay the debt in time.

The IRS files a public document, the “Notice of Federal Tax Lien”, to alert creditors that the government has a legal right to your property.

How to Get Rid of a Lien

Paying your tax debt in full is the best way to get rid of a Federal Tax Lien. The IRS releases your Lien within Thirty (30) days after you have paid your tax debt.

When conditions are in the best interest of both the government and the taxpayer, other options for reducing the impact of a Lien exist, such as:

Discharge of property

A “Discharge” removes the Lien from specific property. There are several Internal Revenue Code (IRC) provisions that determine eligibility.

Subordination

Subordination” does not remove the Lien, but allows other creditors to move ahead of the IRS, which may make it easier for you to get a loan or mortgage.

Withdrawal

A “Withdrawal” removes the public Notice of Federal Tax Lien and assures that the IRS is not competing with other creditors for your property; however, you are still liable for the amount due.

Two (2) additional “Withdrawal Options” resulted from the IRS Commissioner’s 2011 “Fresh Start Initiative”.

(1)       One Option may allow Withdrawal of your Notice of Federal Tax Lien after the Lien’s release. General eligibility includes:

Your tax liability has been satisfied and your Lien has been released; and also:

  • You are in compliance for the past Three (3) years in filing – all individual returns, business returns, and information returns; and
  • You are current on your estimated tax payments and federal tax deposits, as applicable.

(2)       The other Option may allow Withdrawal of your Notice of Federal Tax Lien if you have entered in or converted your regular “Installment Payment Agreement” to a “Direct Debit Installment Agreement”. General eligibility includes:

  • You are a qualifying taxpayer (i.e. individuals, businesses with income tax liability only, and out of business entities with any type of tax debt);
  • You owe $25,000 or less (If you owe more than $25,000, you may pay down the balance to $25,000 prior to requesting withdrawal of the Notice of Federal Tax Lien);
  • Your Direct Debit Installment Agreement must full pay the amount you owe within Sixty (60) months or before the Collection Statute expires, whichever is earlier;
  • You are in full compliance with other filing and payment requirements;
  • You have made Three (3) consecutive “Direct Debit” payments; and
  • You can’t have defaulted on your current, or any previous, Direct Debit Installment Agreement.

How a Lien Affects You

  • Assets — A Lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the Lien.
  • Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
  • Business — The Lien attaches to all business property and to all rights to business property, including accounts receivable.
  • Bankruptcy — If you file for bankruptcy, your tax debt, Lien, and Notice of Federal Tax Lien may continue after the bankruptcy.

Avoid a Lien

You can avoid a Federal Tax Lien by simply filing and paying all your taxes in full and on time. If you can’t file or pay on time, don’t ignore the letters or correspondence you get from the IRS. If you can’t pay the full amount you owe, payment options, such as “Installment Payment Agreements” or an “Offer in Compromise” are available to help you settle your tax debt.

Lien vs. Levy

A Lien is not a Levy. A Lien secures the government’s interest in your property when you don’t pay your tax debt. A Levy actually takes the property to pay the tax debt.

BEWARE – Don’t Get “Scammed” From Tax Scam Artists

Don’t Get Scammed – Protect Yourself From Tax Scam Artists

 Email Phishing Scams

          The tax filing season may be over, but tax scam artists are still going strong. In addition to telephone scams, there’s a new email phishing scam. The emails appear to be from the IRS — but they are not — and include a link to a fake website intended to mirror the official IRS website. The emails contain the direction “you are to update your IRS e-file immediately” and include a fake IRS website.

          Remember: There is only one official IRS website, “IRS.gov”. If you get this message, don’t respond to the email or click on the links. Instead, forward the scam emails to the IRS at “phishing@irs.gov”. For more information, visit the IRS’s “Report Phishing” Web page. The IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issue.

 Telephone Scams

          If you get a call from someone claiming to be from the IRS, there are Five (5) Tell-Tale Signs that the caller is a scammer and not from the IRS. The IRS will never:

          (1)      call you about taxes you owe without first mailing you an official notice;

          (2)     demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe;

          (3)     require you to use a specific payment method for your taxes, such as a prepaid debit card;

          (4)     ask for credit or debit card numbers over the phone; or

          (5)     threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

          If you get a phone call from someone claiming to be from the IRS, here’s what you could do:

          (a)     If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 800-366-4484 or at “www.tigta.gov”.

          (b)     You can file a complaint using the “FTC Complaint Assistant”; choose “Other” and then “Imposter Scams.” If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes. For more information on reporting tax scams, go to “www.irs.gov” and type “scam” in the search box.

Charitable Contributions May Lower Your 2014 Taxes

Charitable Contributions May Help Lower Your Tax Bill

 

         Do you want to lower your tax bill? You can take steps that can lower your 2014 taxes by making charitable contributions. Now is a good time to prepare for the upcoming tax filing season. Taking this step can help you save time and tax dollars.

         If you plan to give to charity, consider donating before the year ends. That way you can claim your contribution as an itemized deduction for 2014. This includes donations you charge to a credit card by December 31st, even if you don’t pay the bill until 2015. A gift by check also counts for 2014 as long as it is mailed in December.

         To get a tax deduction, you must give to a “qualified organization”. You cannot take a deduction for contributions made to specific individuals, political organizations or candidates; you must file IRS Form 1040 and itemize the deduction on Schedule A. Contributions to individuals are not considered charitable.

         If your contribution entitles you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the “fair market value” of the benefit received. So, what does the IRS mean by “fair market value”? This is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.

         For a contribution of cash, check, or other monetary gift, you must maintain a record that includes a bank statement or a written communication from the qualified organization containing the name of the organization, the date of the contribution and the amount. In addition to deducting your cash contributions, you generally can deduct the fair market value of any other property you donate to qualified organizations.

         If you claim a deduction for a contribution of noncash property worth more than $500, you also will need to attach the qualified appraisal to your return and file IRS Form 8283, Noncash Charitable Contributions.

 

         Special rules apply to donations of certain types of property such as automobiles, inventory and investments that have appreciated in value.