The IRS Wants Your Passport

Owe the IRS more than $50,000.00? You might want to hold off on making those travel plans.

If you were to assume that a transportation bill would not have a direct impact on tax policy in the United States, you would be making a reasonable assumption, but you would be wrong. Tucked away into a transportation bill that sailed through the house and senate last week, and was signed into law on Friday, is a provision regarding the revocation of passports and the denial of a passport applications for any taxpayer with a “seriously delinquent tax debt.”

What is a “seriously delinquent tax debt”?

Any taxpayer who owes the IRS more than $50,000.00 is at risk of losing his privilege to travel outside of the United States if either: 1) a lien has been filed on the underlying tax liability and the taxpayer no longer has the right to file for a Collection Due Process hearing (because 35 days have passed) and no Collection Due Process hearing is pending for the liability, OR 2) the IRS has actually issued a levy on the underlying tax liability.

Timing Issues and Other Exceptions

Certification to the State Department that a “seriously delinquent tax debt” exists will not occur until after a taxpayer’s due process rights have been exhausted for either the lien or proposed levy action. In general, taxpayers have a short period of time to challenge the IRS’s attempt to collect on an assessed tax debt. Once the IRS issues a Notice of Federal Tax Lien or a Notice of Intent to Levy, a taxpayer has 35 days (for a lien) or 30 days (for a notice of intent to levy) to challenge the agency action. During that time period – and while any hearing is pending- the IRS will not be sending notice to the State Department that a seriously delinquent tax liability exists – and your passport should not be revoked. What this means is that there is more at stake than ever in making sure that taxpayers with liabilities over $50,000 challenge proposed (levy) or actual (lien) collection action by the IRS.

Taxpayers who are being held jointly and severally liable for a tax debts that really belongs to their ex or current spouses can also protect themselves from the loss of their passports by filing for innocent spouse relief when warranted. A pending Innocent Spouse claim can both prevent the notice from being sent to the State Department in the first place, or – if a notice has already been sent – the IRS will send a second notice after an Innocent Spouse claim is filed allowing the state department to issue or reinstate a passport.

Just another collection tool for the IRS

The IRS will not request the revocation of a passport for taxpayers who are currently enrolled in an installment agreement with the IRS, as long as that Installment Agreement is in good standing. So, if that is the case in your situation – you do not need to worry about losing your passport. In addition, once an Installment Agreement has been established, the IRS will notify the State department within 30 days that your passport can now be issued or renewed. BUT, If you are looking to submit an offer-in-compromise, you will need to wait until the offer has been accepted to get your passport back. Requesting/Electing Innocent Spouse relief will result in a taxpayer being able to get her passport back in (hopefully) about 30 days while the request is pending.

The bottom line is that this new collection tactic clearly disadvantages taxpayers who submit an Offer outside of a Collection Due Process hearing. It creates an incentive for taxpayers who are deciding between submitting an offer-in-compromise or establishing an Installment Agreement to opt for the latter in certain circumstances – namely when they need their passports back.

 

See the full text of the new provisions below.

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How can I remove a federal Tax Lien

Fighting a Federal Tax Lien

Can I Fight a Federal Tax Lien?

How to Remove a Federal Tax Lien

Has a Federal Tax Lien been filed against your personal property? If it has, you may be wondering what a Federal Tax Lien is, and if you can fight it.

What is a Federal Tax Lien?

When the IRS wants to make sure it gets paid on outstanding tax debt, it often files tax liens against the personal property of the taxpayer. The lien gives notice to other lenders, and the public, that you owe money to the IRS. It also encumbers the property, meaning that it cannot be legally sold without first paying off the IRS, or paying off the IRS from the proceeds of the sale.

The IRS can file a Notice of Federal Tax Lien against your real estate property, such as investment properties or the family home, on the land records in your town hall. The IRS can also file a tax lien against your other personal property with the Secretary of State. In Connecticut, we use the CONCORD system, right along with UCC liens. CONCORD can be searched by lenders or members of the public.

Why is a Federal Tax Lien a Big Deal?

A Federal Tax Lien is a big deal because it creates an interest in your property on behalf of the IRS. If the property is ever sold, the proceeds must first go to paying off the IRS before you see a single dollar. This is especially devastating if you are selling a piece of real estate property with the plans of using the money to pay off your mortgage. The IRS lien can strip you of any equity you might have in the property, and sometimes not even leave enough to pay off your mortgage, making the sale of the property unreasonable. Here are some other ways a Federal tax Lien can negatively affect your life:

  • Ruin Your Credit: By informing credit agencies and other lenders of your tax debt, a tax lien can make it difficult or impossible to get a business loan, mortgage or even open a new credit card.
  • Injure Your Reputation: By searching the land records or CONCORD, your friends and neighbors can gain knowledge of your tax debt and your financial situation.
  • Impact Your Profession: Some jobs require you to have healthy credit or even be bonded (insured). Having a tax lien on record can affect your professional reputation and may block you from getting that job you were after (and in turning hurt your ability to pay your tax debts). Further, many employers search for liens when trying to get inside information on the character of a potential employee.

How Can You Fight a Federal Tax Lien?

You can fight a tax lien by having it removed through a release or withdrawal, by having it stripped, or by stopping the IRS from acting on the lien.

An IRS tax lien is released, like any lien, when the underlying debt is paid in full. When a tax debt is satisfied, either by paying the full amount of the debt or less through an Offer in Compromise, a release is filed on the public records. There are now two public records: the Notice of Federal Tax Lien and a Release of Federal Tax Lien. While your obligations to the IRS are gone, anybody searching the records will still be able to see that a lien did exist at one point. The lien will also remain as a mark on your credit report for up to 7 years.

When an IRS tax lien is withdrawn, however, any evidence of the lien is removed. The simplest way to have a tax lien withdrawn is to show that it wasn’t a proper lien: that a the tax debt does not exist, or that it is not your tax debt. The IRS may withdraw a tax lien if the taxpayer enters into an installment agreement under the Fresh Start program. The IRS will also consider withdrawal of a lien if 1) it is in the best interest of the taxpayer AND the United States and/or 2) it will facilitate the collection of the underlying tax debt. A good example is if you need the lien withdrawn so that you can get a loan to pay off your tax debt. Once a lien is withdrawn, it will disappear from your credit history. However, just because a lien has been withdrawn does not mean that the tax debt has been discharged (you might still owe the government money).

A tax lien is stripped through the bankruptcy process, such as Chapter 13 and sometimes Chapter 7 filing. This is complicated and deserves it’s own blog post.

How SHOULD you fight a tax lien?

A release of a tax lien is achieved by either paying the tax debt in full, or through an Offer in Compromise, but a released lien will still leave a mark on your credit history. A withdrawal will take the lien off of your credit report, but it will not discharge the underlying debt and is difficult to convince the IRS to do. Bankruptcy can be expensive and could change your life drastically, leaving a very long-lasting mark on your credit history. In the appropriate circumstances, a Collection Due Process Hearing can temporarily safeguard your property while you propose a resolution to the IRS, but the lien will remain on file while your hearing is pending, and what happens to the lien will depend on the outcome of your hearing. So, which option should you pick? Should you seek a release, fight for a withdrawal, file bankruptcy or request a Collection Due Process Hearing? Should you do more than one?

The answer (or answers) to this question depends on the your specific circumstance. Is the tax debt correct? Do you have the money to pay off the entire debt? Are you looking to repair your credit so that you can get a loan? Are you looking to repair your reputation? All these and many other factors must be considered.

Before you contact the IRS or make any decision about your tax debt situation, you should seek the advice of experienced tax debt resolution professionals. At G&G Law, LLC, our tax resolution attorneys are ready to discuss your circumstances and help you solve your problems. Call us at 203-740-1400.

tax debt is different from credit card debt

How is IRS Tax Debt Different from Credit Card Debt?

Tax Debt vs. Credit Card Debt

How is the Resolution of Tax Debt Different from Resolution of Credit Card Debt?

Everyone has heard tales of how a family member, friend, or that guy sitting across the bar, were able to pay of thousands of dollars of credit card debt for pennies on the dollar (commonly 40 cents on the dollar) by making one lump sum payment. Not only was it (relatively) cheap, but it was so easy! All they had to do was call the credit card company or collection agency and work out a deal. It didn’t even take that long. So, why can’t you settle your tax debt for pennies on the dollar just like credit card debt?!?!

It’s not that you CAN’T settle tax debt for a lower amount, sometimes you can. However, the entire resolution process is different. That is because tax debt is a whole nother animal; an animal with much sharper teeth! The 6 most significant ways in which tax debt differs from credit card debt are:

  1. Tax Debt is Secured: Usually, secured debts are those that are secured by a security instrument, or a document placing  piece of collateral up in exchange for a loan or debt. For example, when buying a house, the loan is secured by a mortgage (the security instrument), placing your house as the collateral. If you do not pay your mortgage, your lender will place a lien on your home, and eventually foreclose. Credit card debt is unsecured. In order for  credit card company to place a lien on your property, the company must take you to court. Even though you never signed a security instrument, YOUR TAX DEBT IS SECURED BY ANY PROPERTY YOU OWN AT THE TIME OF THE DEBT! By law, a lien for the amount of the tax debt exists as soon as the tax liability is incurred (begins to exist) and can be filed as soon as the tax liability is assessed. Own any cars? A home? Vacation house? A world renowned stamp collection? Well they have all now been jeopardized by your tax debt, and any time you sell one of them, the IRS will be there ready to confiscate your proceeds.
  2. The IRS Can Garnish: We’re not talking about fancy French cuisine. The IRS can send notices to your employer, the Social Security office, the Department of Labor which handles unemployment payments, a disability insurer, or anybody else sending you regularly scheduled payments. By law, those people, companies and organizations MUST turn over a portion of your checks to the IRS. If they do not, they are liable to the IRS for amounts that could have but were not collected. How many of them do you think will refuse to the pay the IRS? Credit card companies and debt collectors do not have this power.
  3. The IRS Can Get Your Bank Accounts: Similar to garnishing your wages, the IRS can simply issue a notice to your bank telling them to hand over your money, whether it is in a checking or savings account. By law, the bank must comply. this is another power credit card companies do not possess.
  4. The IRS has 10 Years to Collect Tax Debt: In general, a credit card company has 7 years or less to take you to court over credit card debt. Meanwhile, the IRS can collect tax debt for up to 10 years, starting from when the tax debt is assessed. If you failed to file a tax return, there is nothing stopping the IRS from assessing debt under that unfiled tax return 5, 10, 20 even 30 years later, and only at that time does the 10 years start to run. For example, the debt from an unfiled tax return from 2000 could be assessed in 2020, and the IRS would have until 2030 to collect!
  5. IRS Collections Are Kept In-House: If you stop paying your credit card bills, the credit card company will sell your debt to a collection agency, who will gladly settle your debt for almost any amount over what they paid to acquire it. The IRS no longer sells tax debt to collection agencies (any agency claiming they bought and are collecting on your tax debt is a scam!). This lessens the taxpayers bargaining power when settling debt.
  6. IRS Policy is Law: Credit Card companies have policy and procedure manuals that are followed by their employees. Their policies and procedures must also comply with the Fair Credit Collection Practices Act. When attempting a settlement, the credit card company policies and procedures can be challenged based on their compliance with the FCCPA or based on reasonableness. The IRS, however, develops its own policies and procedures, and since it is a government agency, these then become law. The IRS answers to nobody but themselves.

As you can see, tax debt is far more serious of a financial issue than credit card debt. The IRS has more ways to get at your money and it’s easier for them to do so. The IRS has more time to collect on your tax debt also. Further, the taxpayer has less bargaining power because the IRS makes its own laws.

If you need help fighting or settling your tax debt, the tax resolution attorneys at G&G Law, LLC can help. We have knowledge of the IRS policies and procedures, and have experience navigating their system. We are more than just another hotline from an infomercial; call 203-740-1400 to speak to a tax resolution attorney.

Should unemployed taxpayer make offer in compromise with IRS?

Making an Offer in Compromise When Unemployed – IRS Tax Debt Relief

Should I Make an Offer in Compromise While Unemployed?

Unemployment as a Factor for Offer in Compromise

An Offer in Compromise is one of the many tools in the tax debt resolution toolbox. An Offer in Compromise is is essentially an offer to make a lump sum payment, or 24 monthly payments to the IRS in an amount less than the entire tax debt amount, which the IRS can choose to accept in full satisfaction of the tax debt. One of the main factors for the IRS to accept or deny an Offer in Compromise is the taxpayer’s “reasonable collection potential”. It would make sense that unemployment would lower ones collection potential, and increase the likelihood of the IRS accepting an Offer in Compromise, right? Well, the answer might surprise you.

First, let us take a look from the perspective of an employed person making an Offer in Compromise to the IRS. An employed person makes X dollars. The IRS knows this person made X dollars last month, X dollars this month, and will likely make X dollars next month. The employed persons collection potential is fairly certain. The IRS can look at the level of income and determine if the offer they made is reasonable.

The income of an unemployed person is less certain. If a person made $100,000 a year last year but is currently unemployed, who is to say they won’t go right back to making  decent income next month or next year, or some time after the offer in compromise is accepted? Perhaps they will make even more money than before. Perhaps if the IRS holds out, they will be able to get payment in full for your tax liability, maybe even garnish your wages directly. The bottom line is that unemployment adds another factor for the IRS to consider when evaluating an offer in compromise; a factor that can work against the taxpayer!

How Can G&G Law, LLC Help Unemployed Taxpayers with Tax Debt?

Just because you are unemployed does not mean that your offer in compromise will get rejected. As competent and experienced tax resolution attorneys, we can lessen the affect unemployment has on the offer in compromise consideration process by:

  • explaining to the IRS that employment in the near future is not likely;
  • finding and presenting evidence of a loss in future earning capacity; and/or
  • offering the IRS a reason why future employment will not affect collection potential.

Should Unemployed Taxpayers Make an Offer in Compromise?

Nothing prevents an unemployed person from making an offer in compromise. However, while you CAN make an offer while unemployed, the more important question is: SHOULD you?

Every case is different. The reason one owes a tax debt to the IRS, how long they have owed it, the amount of the tax debt, and the financial circumstances of the taxpayer are different in every situation. Without reviewing the totality of the circumstances, it is impossible to make a recommendation. However, there are other options for settling tax debt besides an offer in compromise. You can have your accounts marked “Currently Not Collectible” due to unemployment, which will stop the IRS from taking your savings until your financial situation improves. You can get set up with a Partial Payment installment Agreement that is manageable with your limited financial capacity. If your finances are totally unmanageable, you may even be a candidate for bankruptcy.

Before proceeding with any tax resolution method with the IRS, you should consult a tax resolution professional. Only someone with a full understanding of your situation and a complete knowledge of IRS policy and procedure can properly advise you on how to proceed. If you need to resolve a tax debt with the IRS, we are here to help. We are not simply some tax hotline from an infomercial: Call 203-740-1400 to speak to a tax resolution attorney.

 

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What is the Offer in Compromise Success Rate?

IRS Offer in Compromise Success Rate – Acceptance Percentage By Year

What Percentage of Offer in Compromise Submissions are Accepted by the IRS?

Offer in Compromise Success Rate

A commonly used tactic for the relief of IRS tax debt is to make an Offer in Compromise. If you are not familiar with what an Offer in Compromise is, please read our post, “What is an Offer in Compromise?“. Whether you have already submitted an Offer in Compromise and have been waiting to hear back from the IRS (feeling like forever yet?) or you are simply weighing your options of how to proceed with meeting your tax liabilities, you may find yourself asking, “What is the Offer in Compromise acceptance rate?”.

Luckily, the IRS publishes a yearly Data Book jammed full of exciting IRS statistics! “Woooohoooo!” scream the fun-loving children of America. Yes, that is sarcasm, the Data Book is a very boring read, and would be highly effective as a bedtime story. However, it does allow us to answer the question at hand. Please note, these stats are nationwide, the numbers run from Oct.1 to Sept. 30, and the IRS rounds their Offer in Compromise statistics to the nearest thousand.

  • In 2010, there were 57,000 offers of which 14,000 were accepted, a success rate of 24.6%;
  • In 2011, there were 59,000 offers of which 20,000 were accepted, a success rate of 33.9%;
  • In 2012, there were 64,000 offers of which 24,000 were accepted, a success rate of 37.5%;
  • In 2013,  there were 74,000 offers of which 31,000 were accepted, a success rate of 41.9%; and
  • In 2014, the last year for which statistics are currently available, there were 68,000 offers of which 27,000 were accepted, a success rate of 39.7%.

There are a few patterns we can see emerge when we analyze these statistics. The first is that the number of offers submitted goes up year to year until 2014. The second is that the rate of acceptance seems the increase year to year until you get to 2014. however, perhaps the most important pattern, is that the acceptance rate is ALWAYS far less than half. In 2014, 3 of every 5 Offers in Compromise made to the IRS were rejected. Those are people who waited months for an answer just to be disappointed.

Why Would the IRS Reject an Offer in Compromise?

This is no simple answer and there could be more than one reason why any specific Offer in Compromise is rejected. It could be something as simple as making errors on Form 656. It could be because the IRS feels they can easily collect the full amount of the tax liability from the taxpayer. It could be because the taxpayer has not met the requirement of “coming into complete compliance”, which could be due to many factors, such as not filing any of the returns for the past 10 years. Perhaps the IRS Agent in charge of your file feels like they need to make an example of you….

Each tax liability and taxpayer is different, so ever Offer in Compromise has it’s own factors. Many of the offers fail because they had 0% chance of success from the beginning and should never have been made.

How Does a Taxpayer Increase Their Chance of Success with an Offer in Compromise?

Do not believe anyone who tells you that you are guaranteed to succeed on your Offer in Compromise: it is not up to them, it is up to the IRS.

The best way to increase the chance of success for your offer in compromise is to make sure it is part of a complete tax plan which you made with the assistance of a tax professional or tax attorney. here at G&G Law, LLC, our law firm has a much higher offer acceptance rate than the national average. We won;t share that percentage here because as the Connecticut Bar likes to remind us, “past results are not an indicator of future performance”, and of course, this is an accurate statement.

How Does G&G Law, LLC Increase the Chance of Offer in Compromise Success?

  • We consult with our clients to make a tax plan and determine if an Offer in Compromise is right for them (there are other options);
  • We make sure our clients actually qualify for an Offer in Compromise;
  • We make sure the tax debt is rightful!!!;
  • We make sure our clients have come into compliance with the IRS;
  • We know what the IRS is looking for and present the Offer in a light most favorable to our client;
  • We provide all details the IRS needs to make a determination, and nothing more, to avoid making unnecessary or additional disclosures;
  • We can appeal unreasonable rejections.

Dealing with the IRS is not something you have to do alone! We are here to offer our knowledge, experience and professional guidance.