How to deal with a Federal Tax Levy

How to deal with a Federal Tax Levy

Last week’s article discussed how to avoid a federal tax levy.  It is linked here. But what do you do if you already have been levied?

My firm, By The Book Taxes, located in Norwalk, CT specializes in income tax preparation for individuals, families and self-employed people. By the Book Taxes also helps clients resolve their tax debts by preparing and filing Installment Payment Agreements, Offers-in-Compromise, Currently Not Collectible and Innocent or Injured Spouse applications.

You should do the same things after a levy has occurred as you would to avoid a tax levy:

  • Hire a tax professional with experience in tax resolution
  • File all delinquent tax returns (last six years)
  • Ensure your W-2 withholding or estimated tax payments are sufficient and up to date

You should also have the tax professional request that the IRS release the levy in full or at least partially in order to pay necessary living expenses while the taxpayer gets into compliance.

 The bank has twenty-one (21) days from the time the funds are removed from the taxpayer’s account to send them to the IRS so the taxpayer and tax professional must act quickly.

Once the tax returns are all filed, work with your tax professional to tailor the best collection alternative for you with the IRS whether it’s an installment payment agreement, offer-in-compromise or currently not collectible status.

Please don’t ignore the IRS collection letters!

If you have years of unfiled tax returns or owe the back taxes, please call me. I can help.

Avoiding a Federal Tax Levy

Avoiding a Federal Tax Levy

As the IRS escalates its collection process, taxpayers receive letters called the “Final Notice” before a levy occurs. Depending on which area of the IRS is threatening to levy, the taxpayer may receive a “Letter 11”, a “Letter 1058” or even a “CP 90” or “CP 91”.

The best way to avoid a federal tax levy is to get into tax compliance. Engage a tax professional who does tax resolution work immediately. Request a collection due process or “CDP” hearing to stop the levy process to give you time to propose a collection alternative to the IRS.

My firm, By The Book Taxes, located in Norwalk, CT specializes in income tax preparation for individuals, families and self-employed people. By the Book Taxes also helps clients resolve their tax debts by preparing and filing Installment Payment Agreements, Offers-in-Compromise, Currently Not Collectible and Innocent or Injured Spouse applications.

What is tax compliance? It comes in two forms, being current on the filing of your tax returns and being current in your tax payments.

For the filing of your tax returns, the IRS defines compliance as having returns filed for the last six (6) tax years. If you have unfiled returns during this period, get them filed!

For tax payments, there are three (3) requirements:

  • W-2 withholding for employees
  • Estimated payments for the self-employed and
  • Payroll tax filings and payments for businesses with employees

W-2 employees need to have at least 90% of their current year tax liability paid through withholding or 100% of last year’s liability withheld in the current year (110% of last year’s number if their income exceeds $150,000).

Once the tax returns are all filed, work with your tax professional to tailor the best collection alternative for you with the IRS whether it’s an installment payment agreement, offer-in-compromise or currently not collectible status.

Please don’t ignore the IRS collection letters!

If you have years of unfiled tax returns or owe the back taxes, please call me. I can help.