When the Internal Revenue Service, the federal agency that enforces U.S. tax laws, says that you owe taxes for any of a myriad of reasons, do not roll over and pay without investigating whether the charge is right, whether there is a way to reduce or eliminate the tax or whether other defensive strategies exist.
In fact, it is smart to seek legal counsel as soon as you receive a notice from the IRS that you owe taxes. The IRS makes mistakes more than you might think and sometimes a letter or phone call, or providing missing documentation, can quickly clear it up.
But it is sometimes not that simple to resist IRS efforts to collect taxes from you that you think you may not owe or that you cannot pay. In such situations, it is crucial to consult with an experienced tax lawyer who can investigate the situation, advise you of your legal options and take action on your behalf. Having a skilled tax attorney on your side to communicate with tax officials for you helps reduce your stress and allows a professional advocate to respond smartly to IRS demands.
In Massachusetts, tax lawyer Gerard J. Levins of Levins Tax Law, LLC, is a staunch taxpayer advocate with convenient offices in Boston and Framingham.
So what might the IRS do to collect taxes it says you owe? First, it will tell you to pay them, plus interest and possible penalties. However, if you do not timely respond to a tax assessment in a way that resolves the situation, the IRS has formidable powers to collect money it believes is due:
- It may file a public Notice of Federal Tax Lien against your property that can hurt your credit
- It may levy against your assets by seizing wages, bank accounts, retirement income, Social Security payments, vehicles, luxury items like boats, real estate and more
- It may seize your federal or state tax refunds
- And other options
If you and your legal advisor determine that you do owe taxes, but you are unable to pay them; or resolve to challenge the tax assessment as inappropriate or unlawful, your possible solutions, depending on the circumstances, may include:
- Entering an installment payment arrangement
- Requesting that the IRS delay its collection efforts
- Negotiating an offer in compromise or OIC, a settlement agreement with the IRS that reduces the amount owed
- Filing for bankruptcy that should stop tax collection efforts and may either eliminate your tax debt or at least stop interest and penalty assessment
- Asserting that you are unable to pay because of financial hardship in an effort to achieve currently noncollectible status
- Challenging a federal tax lien that was inappropriately filed or asking that it be subordinated to another lien
- Asking for administrative or federal court review or appeal of the IRS tax determination, an IRS collection effort or other harmful IRS action
- Asserting that the statute of limitations has run, meaning the IRS waited too long to collect and missed the deadline
- Requesting that the IRS remove its tax lien from certain property in some circumstances
- Seeking innocent spouse relief if you think your spouse is liable instead of you
- Negotiating the release of wage garnishment or bank account seizure
- And more
This is only an introduction to IRS tax collection efforts and possible taxpayer responses. Seek the advice of a knowledgeable tax attorney for more information applicable to your situation.