Owing back taxes is not uncommon. There are a variety of reasons taxes become delinquent: neglect, no money, tax evasion. Some taxpayers fly under the radar of the IRS, but only for so long. The IRS soon catches wind and takes aim.
In today’s ever-evolving tax landscape, keeping your clients compliant with IRS regulations is more crucial than ever. The risk of IRS enforcement action is not one to be taken lightly, as non-compliant taxpayers can face significant consequences. In this insightful article, we will delve into the intricacies of IRS enforcement action, highlighting the reasons behind these actions and the potential ramifications for your clients. With a deeper understanding of the enforcement process, you’ll be better equipped to guide your clients through proactive measures and develop strategies to minimize their risk of being caught off-guard by the IRS. Strengthen your tax resolution practice by staying informed and prepared.
The First Bill
If a taxpayer owes back taxes, the IRS begins the collection process by sending a bill. If he or she doesn’t pay the first bill, the IRS will send at least one more bill. The IRS will start to enforce collection actions if necessary. Collection actions can range from taking future tax refunds to seizing your property.
IRS Next Steps
After a battery of attempts to collect what is owed, the IRS may need to resort to more extreme measures. The IRS will automatically impose a tax lien if the taxpayer does not pay taxes due after receiving the first bill. In some cases, the IRS may place a tax levy on property and/or assets. Yes, it’s as bad as it sounds. Think of it as your back against a wall.
What is the Difference Between a Tax Levy and Tax Lien?
A tax levy is different than a tax lien in that a tax lien is an actual claim against your property. The IRS uses a tax lien as security for tax debt. It protects the government’s interest in taxpayer debt.
A tax levy refers to a legal seizure of property to satisfy a tax debt. With a tax levy, the IRS actually takes property in order to satisfy tax debt.
Before the IRS places a tax levy on assets, they do the following:
The IRS first sends a “Notice and Demand for Payment” after their tax assessment has been made. If the taxpayer neglects or refuses to pay the tax balance shown on the notice, the IRS then sends a “Final Notice of Intent to Levy and Notice of Your Right to A Hearing,” a levy notice. The taxpayer may receive this notice at home, work, or in person.
Still No Response?
If the taxpayer makes no response within 30 days of sending the levy notice, the IRS will not assume it’s been lost in the mail. They place a tax levy on property/assets.
How Does the IRS Levy?
The IRS may seize and sell any type of real or personal property the taxpayer owns or has an interest in. A wage garnishment is the most common form of IRS levy. The IRS will order an employer to subtract a certain amount of money from each pay period to go toward paying the tax liability.
They don’t drag it out or stop to think of how much the taxpayer will need to survive on. They want their money and having been ignored in past attempts, usually, only a small portion is left for him or her to keep. Other forms of levy can include real estate (even a home,) a car, bank accounts, retirement funds, rental income, and more.
While tax levies and tax liens seem harsh, they are typically the IRS’s last resort. It’s best to face a tax bill head-on as the IRS values attempts. How can you support your tax-delinquent clients in IRS dealings?
How IRS Solutions Can Help You Manage Your Clients’ IRS Enforcement Action
IRS Solutions Software gives you the confidence to provide services you may have been uncomfortable with in the past. Another benefit of membership is the training you get on our monthly case study calls.
By making sure your clients understand the importance of responding to IRS letters and new laws you’ll both avoid a big surprise when you least need it next tax season.
