A client and an attorney handshake after a successful tax collection case in Scottsdale.

Owing money to the I.R.S. creates a stressful situation for businesses and individuals.  The experienced Scottsdale tax collection attorneys at Kaczmarek & Jojola PLLC can help resolve these types of issues.

There are usually some good reasons why an individual or a business finds themselves in these types of situations. Taxpayers generally owe the I.R.S. because of unfiled tax returns, inability to pay the taxes due when the return was filed, or a liability resulting from an audit.

When a taxpayer has outstanding IRS debt, the IRS sends numerous letters notifying the taxpayer of the amount they owe. These IRS notices start off by taking an informative tone but become increasingly more threatening as time goes on. Eventually, taxpayers may face the IRS collection process.

Negotiating Tax Debt with the IRS

IRS negotiations are typically done through an Offer in Compromise (OIC). An OIC is simply an agreement between a taxpayer and the IRS to settle an outstanding tax bill for less than the total amount owed. The IRS is most likely to accept an OIC if it does not believe that it will be able to collect the full amount of back taxes within a reasonable amount of time. When reviewing OIC applications, the IRS considers the following:

  • The filer’s ability to pay;
  • The filer’s income;
  • The filer’s expenses; and
  • The filer’s asset equity or debt ratio.

Notably, the IRS will not review an OIC application unless there are any outstanding tax returns or if the filer has not made all estimated tax payments.

IRS Collections Methods

IRS collection in Scottsdale.Occasionally, a taxpayer ignores IRS notices, ultimately resulting in an IRS collection action. If IRS debt goes unpaid, the IRS can obtain a federal tax lien against the taxpayer and a tax levy on an asset. While tax liens and tax levies are both used by the IRS and are often confused as the same thing, they are different.

A federal tax lien is a legal right against all of a taxpayer’s property that gives the IRS the ability to recoup the money it believes a taxpayer owes by eventually seizing and selling the taxpayer’s property. Placing a lien, on its own, does not necessarily mean that an asset will be seized or sold. A lien only gives the IRS the right to seize and sell property.

The IRS can issue a federal tax lien once:

  • The IRS calculates the amount of tax due;
  • Sends the taxpayer a tax bill, called the Notice and Demand for Payment; and
  • The taxpayer does not pay the tax bill in full by the due date.

If a taxpayer fails to resolve their IRS debt, they may also receive notice of an IRS tax levy. A tax levy refers to the actual seizure of assets. When the IRS levies an asset, it will physically take the asset from the taxpayer. Through its ability to levy property, the IRS can garnish wages, take money in a bank or investment account, and seize and sell real estate, vehicles, and other personal property.

The IRS may levy a taxpayer’s property when:

  • The IRS sent the taxpayer a Notice and Demand for Payment;
  • The taxpayer failed to pay the IRS debt; and
  • The IRS sent the taxpayer a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice).

Once a taxpayer receives a levy notice, they have 30 days to pay their outstanding tax debt, otherwise, the IRS may levy their property. However, if the taxpayer satisfies the debt, the IRS collection process will typically cease. There are several IRS collection payment options available to taxpayers, including payment plans, offers in compromise, part-pay installment agreements, and currently-not-collectible status. However, a taxpayer must apply to be placed into one of these collection options.

In addition to tax liens and tax levies, the IRS has a broad ability to issue fines and penalties for a taxpayer’s failure to comply with the Internal Revenue Code. In certain cases, taxpayers will face criminal liability. It is imperative to consult with a Scottsdale tax collection lawyer if you suspect you may face criminal liability.

In collection cases, we review your current financial situation, your tax debts, and discuss various options to ease your burden.  The more prepared you are for our initial meeting, the more we can accomplish during this meeting.  The questionnaire on our website contains much of the information we need to evaluate your case.  By the end of our first meeting, we typically have a plan to handle your I.R.S. debt.

In order to make the first meeting as productive as possible, please try to gather the following documents:

  1. Most recent three months’ bank statements
  2. Most recent three months’ investment accounts
  3. List of assets
  4. Most recent statement for any assets
  5. List of loans, including mortgages and auto loans
  6. Most recent statement for any loans
  7. Profit & Loss statement covering 6-12 months (if applicable)
  8. Most recent state/local tax liability correspondence
  9. Most recent I.R.S. correspondence
  10. Most recent tax returns

Ignoring IRS tax debt will only make your situation more difficult to deal with in the long run, potentially resulting in additional penalties, up to and including the seizure of assets and even criminal liability. Our Scottsdale tax collection attorneys can take an in-depth look at your situation and help you develop a plan that is both manageable and effective. We handle all types of IRS collection cases, including those involving tax liens, tax levies, and passport revocation resulting from unpaid tax debt. To learn more, and to speak with our Scottsdale tax collection lawyers about your situation, call today. You can also connect with us through our online form.