Report finds IRS Lien Determinations Were Untimely or Inappropriate for Some $1.4 Billion in Taxes Due
WASHINGTON – The Internal Revenue Service made untimely or inappropriate lien determinations for more than $1.4 billion in delinquent taxes, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
The IRS protects its claims against taxpayers who owe delinquent taxes by filing Federal tax liens. These liens establish the IRS’s priority among secured creditors for the taxpayers’ equity. Liens are generally filed on balance-due cases in which the taxpayer has received a notice demanding payment and has neglected or refused to pay.
The IRS can decide not to file liens when a taxpayer is in bankruptcy, has died without assets, when a corporation is defunct and miscellaneous other categories. Revenue officers are required to document a decision on whether a lien should be filed and include an explanation when they are not filed.
Revenue officers are supposed to attempt initial contact with a taxpayer or taxpayer’s representative within 45 days after they are assigned the taxpayer’s modules. A module refers to one specific tax return filed by the taxpayer for one specific tax period (year or quarter) and type of tax (i.e., individual, corporate, employment, excise, etc).
According to the report, the IRS did not make lien determinations for 210 open modules at two collection field offices representing a balance due of $6.4 million. In addition, IRS revenue officers did not document valid reasons for not filing liens when closing as “currently not collectible” an estimated 2,297 modules, with $72 million in delinquent taxes.
The report also found that liens were not filed on shelved modules within a certain dollar threshold, even though an IRS study has shown a benefit in doing so. TIGTA’s analysis found that between 2002 and 2008, the IRS shelved, without filing liens, modules representing approximately $1.4 billion in delinquent taxes. Shelved modules are placed in a currently not collectible status and no collection work is conducted.
“The IRS must ensure the appropriate handling of lien determinations,” said J. Russell George, the Treasury Inspector General for Tax Administration. “Failure to protect the Government’s interest on taxes that are owed creates an unfair burden on taxpayers who properly pay their taxes in full and on time,” he said, adding: “I am pleased that the IRS has agreed with our recommendations to address the identified shortcomings.”
TIGTA made eight recommendations that the IRS ensure that revenue officers document their reasons for not filing liens against delinquent taxpayers and ensure that timely lien determinations are made. The IRS agreed with TIGTA’s recommendations.
Source : www.treas.gov
Innocent Spouse
Dealing with a back tax debt of your own can be stressful enough, but being held responsible for the back tax liability of a spouse – or former spouse – can be even more trying. Fortunately, there may be relief from being held responsible for your spouse’s or ex- spouse’s back tax liability.
The general rule is: when a couple files a joint federal tax return, the IRS will hold both taxpayers responsible for any unpaid tax debts. The IRS will even keep any refund available and apply it to a past due tax liability—even if the couple later begins to file separately but incurred the original debt while filing jointly. Some taxpayers might file separately to avoid a withheld refund, but this can cause the couple to miss out on valuable tax advantages for married taxpayers. This blog entry will explain the basics of the IRS’s Injured Spouse Relief program.
What is an Injured Spouse and what is the Relief the IRS Provides?
For federal tax purposes, an Injured Spouse is someone that is denied a tax overpayment refund or a portion of a refund because the funds were applied to off-set a past-due obligation of a spouse or ex-spouse. This obligation can be a past-due federal tax, state income tax, child or spousal support or even a federal “non-tax” debt, such as a student loan. In this case, the spouse is injured because they do not have a legal obligation to the past-due amount but by having their overpayment applied to the liability, the IRS is in fact holding the person responsible for the debt.
As a remedy to holding a non-liable person responsible for the federal debts of their spouse or non-spouse, the IRS offers Injured Spouse Relief. To avoid having a refund withheld, a taxpayer can request Injured Spouse Relief at the time they file their tax return. If approved, the injured spouse will not be held responsible for their spouse’s federal tax debts, state tax liabilities, etc. The IRS will also determine the amount of tax owed by or overpayment due to each spouse.
Thus, an injured spouse may be able to recover their loss (misapplied refund) should the IRS approve the taxpayer’s claim for relief. According to the IRS, in order to qualify for Injured Spouse Relief, a taxpayer must meet the following three conditions:
1. You must not be legally obligated to pay your spouse’s past due tax liability.
2. You must report income such as wages, taxable interest, etc., on the joint return.
3. You must have made and reported payments, such as federal income tax withheld from your wages or estimated tax payments, or you claimed the earned income credit or other refundable credit, on the joint return.
Most Americans will need to meet all three of the qualifications to be deemed an injured spouse.
However, if you live in a community property state (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, or Wisconsin) then you will only need to meet the first qualification. In community property states, over-payments are considered joint property and are generally applied (offset) to legally owed past-due obligations of either spouse. Please note that there are exceptions. The IRS will use each state’s rules to determine the amount, if any, that should be refunded to the injured spouse. Under state community property laws, 50% of a joint overpayment (except the earned income credit) is applied to non-federal tax debts such as child or spousal support, student loans, or state income tax. However, state laws differ on the amount of a joint overpayment that can be applied to a federal tax debt. If you believe you are an injured spouse but live in a community property state, you should seek the help of a professional.
Professional Help
Once you have determined the IRS has, or will, withhold a refund because of your spouse’s past due taxes, you should print out a copy of IRS Form 8379. You will then need to allocate income, adjustments, deductions, and credits between you and your spouse in Part 2 of the form. After completing the form, you can mail it to the IRS with your tax return, or if you have already filed your return, then you can just mail it to the IRS. For those of you who e-file your return, you can even include Form 8379.
Unfortunately, qualifying for Injured Spouse Relief is not as easy as it may seem. Properly allocating deductions and credits on IRS Form 8379 can be very confusing and a simple error could lead to the IRS rejecting your request. Seeking the help of an experienced tax professional may be in your best interest.
Prevention
Some people may claim the only way to truly avoid being held responsible for a spouse’s back tax liability is to always file separately. However, this can result in the loss of valuable tax incentives for married taxpayers. Instead, engage in an honest conversation with your partner about both of your finances before you get married so you will know in advance about any potential tax problems. If your spouse has tax problems, then you can proactively file for Injured Spouse Relief when you file your return so your part of the refund won’t be used to pay your spouse’s prior tax debts.
Innocent Spouse vs. Injured Spouse
“Injured” Spouse Relief is often confused with the similarly named “Innocent” Spouse Relief, but each program was actually created to help different types of taxpayers. Part of the reason for the confusion is because until 1988, Innocent Spouse Relief was the only option for a married taxpayer to be relieved of a tax liability stemming from their spouse’s errors. Fortunately, these days the IRS offers both programs. Unlike Injured Spouse Relief, in order to qualify for Innocent Spouse Relief, taxpayers must prove they had no knowledge of the errors leading to a back tax debt when they signed the tax return. For more information on the Innocent Spouse Relief program, read this post on the Tax Relief Blog.
Injured Spouse Relief
Dealing with a back tax debt of your own can be stressful enough, but being held responsible for the back tax liability of a spouse – or former spouse – can be even more trying. Fortunately, there may be relief from being held responsible for your spouse’s or ex- spouse’s back tax liability.
The general rule is: when a couple files a joint federal tax return, the IRS will hold both taxpayers responsible for any unpaid tax debts. The IRS will even keep any refund available and apply it to a past due tax liability—even if the couple later begins to file separately but incurred the original debt while filing jointly. Some taxpayers might file separately to avoid a withheld refund, but this can cause the couple to miss out on valuable tax advantages for married taxpayers. This blog entry will explain the basics of the IRS’s Injured Spouse Relief program.
What is an Injured Spouse and what is the Relief the IRS Provides?
For federal tax purposes, an Injured Spouse is someone that is denied a tax overpayment refund or a portion of a refund because the funds were applied to off-set a past-due obligation of a spouse or ex-spouse. This obligation can be a past-due federal tax, state income tax, child or spousal support or even a federal “non-tax” debt, such as a student loan. In this case, the spouse is injured because they do not have a legal obligation to the past-due amount but by having their overpayment applied to the liability, the IRS is in fact holding the person responsible for the debt.
As a remedy to holding a non-liable person responsible for the federal debts of their spouse or non-spouse, the IRS offers Injured Spouse Relief. To avoid having a refund withheld, a taxpayer can request Injured Spouse Relief at the time they file their tax return. If approved, the injured spouse will not be held responsible for their spouse’s federal tax debts, state tax liabilities, etc. The IRS will also determine the amount of tax owed by or overpayment due to each spouse.
Thus, an injured spouse may be able to recover their loss (misapplied refund) should the IRS approve the taxpayer’s claim for relief. According to the IRS, in order to qualify for Injured Spouse Relief, a taxpayer must meet the following three conditions:
1. You must not be legally obligated to pay your spouse’s past due tax liability.
2. You must report income such as wages, taxable interest, etc., on the joint return.
3. You must have made and reported payments, such as federal income tax withheld from your wages or estimated tax payments, or you claimed the earned income credit or other refundable credit, on the joint return.
Most Americans will need to meet all three of the qualifications to be deemed an injured spouse.
However, if you live in a community property state (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, or Wisconsin) then you will only need to meet the first qualification. In community property states, over-payments are considered joint property and are generally applied (offset) to legally owed past-due obligations of either spouse. Please note that there are exceptions. The IRS will use each state’s rules to determine the amount, if any, that should be refunded to the injured spouse. Under state community property laws, 50% of a joint overpayment (except the earned income credit) is applied to non-federal tax debts such as child or spousal support, student loans, or state income tax. However, state laws differ on the amount of a joint overpayment that can be applied to a federal tax debt. If you believe you are an injured spouse but live in a community property state, you should seek the help of a professional.
Professional Help
Once you have determined the IRS has, or will, withhold a refund because of your spouse’s past due taxes, you should print out a copy of IRS Form 8379. You will then need to allocate income, adjustments, deductions, and credits between you and your spouse in Part 2 of the form. After completing the form, you can mail it to the IRS with your tax return, or if you have already filed your return, then you can just mail it to the IRS. For those of you who e-file your return, you can even include Form 8379.
Unfortunately, qualifying for Injured Spouse Relief is not as easy as it may seem. Properly allocating deductions and credits on IRS Form 8379 can be very confusing and a simple error could lead to the IRS rejecting your request. Seeking the help of an experienced tax professional may be in your best interest.
Prevention
Some people may claim the only way to truly avoid being held responsible for a spouse’s back tax liability is to always file separately. However, this can result in the loss of valuable tax incentives for married taxpayers. Instead, engage in an honest conversation with your partner about both of your finances before you get married so you will know in advance about any potential tax problems. If your spouse has tax problems, then you can proactively file for Injured Spouse Relief when you file your return so your part of the refund won’t be used to pay your spouse’s prior tax debts.
Innocent Spouse vs. Injured Spouse
“Injured” Spouse Relief is often confused with the similarly named “Innocent” Spouse Relief, but each program was actually created to help different types of taxpayers. Part of the reason for the confusion is because until 1988, Innocent Spouse Relief was the only option for a married taxpayer to be relieved of a tax liability stemming from their spouse’s errors. Fortunately, these days the IRS offers both programs. Unlike Injured Spouse Relief, in order to qualify for Innocent Spouse Relief, taxpayers must prove they had no knowledge of the errors leading to a back tax debt when they signed the tax return. For more information on the Innocent Spouse Relief program, read this post on the Tax Relief Blog.
10 Facts About Back Takes
For various reasons, you may not have filed your federal income tax return for this year or previous years. You may not have known whether you were required to file. You may not have filed because you owe additional tax that you cannot afford to pay in full. You may not have filed because you expect a refund and just have not taken the time to complete the return. If you have a “back tax” liability, it must be resolved in order to stop IRS collection actions.
Regardless of your reason for not filing or how your “back taxes” have been generated, file your tax return as soon as possible. Voluntary filing will eliminate any criminal charge. If your return was not filed by the due date (including extensions), you may be subject to the failure to file and failure to pay penalties. Penalties and interest are part of your “back taxes.” However, if you filed on time but did not pay in full, you will be subject only to the failure to pay penalty. Interest is charged on taxes not paid by the due date, even if you have an extension of time to file. Interest is also charged on penalties.
One:
Ask the IRS for a copy of your tax transcript.The Transcript will identify all of the income reported to the IRS on your W-2 and Form 1099 Information Returns. The transcript will identify the source of your “back taxes.” Make sure your tax return includes that income. The transcript will also identify years for which the IRS did not receive a filed tax return.
Two:
Get information from IRS Publications and Forms. The IRS Publications have a great deal of information that you can use to resolve your “back tax” issues. This link will also give you the tax forms you need to deal with your back tax problems.
Three:
Gather All Your Tax Documents
Gather your W-2s sand Forms 1099. Gather your bank statements to identify deposits that represent income. Gather all documentation for deductions and business expenses. It is important to document your income and deductible amounts.
Four:
Prepare the Tax Returns or Hire a Tax Professional
If you are going to prepare your tax returns yourself, be sure to use a reliable and easy-to-use software program. You can save time by preparing and filing your own tax returns.
Either way, you’ll be doing plenty of work yourself, such as tracking down missing information.
Six:
Protect Your Tax Refunds
Late filers are likely to have tax refunds. You can track your refunds at
http://www.irs.gov/individuals/article/0,,id=96596,00.html.
In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within the three years, the money becomes the property of the U.S. Treasury. After the expiration of the refund statute, not only does the law prevent the issuance of a refund check, it also prevents the application of any credits, including overpayments of estimated or withholding taxes, to other tax years that are underpaid.
Seven:
Pay off Your Tax
You need to plan on how to protect yourself from an IRS investigation, assessment, levy, or lien. The IRS is not a friendly creditor, you do not want them to levy your salary or bank accounts.
Eight: Installment Agreement If You Cannot Afford to Pay Your Tax Debt
There is very strong Congressional tax policy encouraging the IRS to accept payments in Installments. However, an Installment Agreement will not prevent the IRS from filing a lien against you in the public records. We can help you negotiate an Installment Agreement.
Nine:
Offer in Compromise
If you cannot afford to pay your tax debts and cannot afford to make payments on installments, you may qualify for an Offer in Compromise.
Ten:
Hand deliver your tax returns.
The IRS loses tax returns and is slow to get the returns into their data base. Get the IRS to stamp “received” on a copy of your the tax returns so that you can always prove that the tax returns have been filed. IRS local offices can be found in the following link: http://www.irs.gov/localcontacts/
The Statute of Limitations on Collections is the amount of time that the Internal Revenue Service (IRS) has to collect a back tax liability from a taxpayer. According to the Internal Revenue Code, Section 6502, the IRS generally must collect the back taxes “within 10 years after the assessment of the tax debt.” Depending on the taxpayer, the assessment of tax may be the date a taxpayer files a tax return with a balance owing back taxes. The statute of limitations will begin once the tax has been “assessed” by the IRS.
The IRS Offers Help to Filers Who Have Difficulty Paying Their Taxes
Now that tax season is under way, April 15th may be looming large for many individuals and businesses who will have difficulty paying taxes this year. Under trying economic conditions, a significant percentage of tax payers may seek some form of tax relief.
The good news is that the IRS actually offers a little flexibility when it comes to fulfilling tax obligations. But tax payers must be aware of these leniencies and know how and when to use them.
Here are some options for individuals and small business owners who think they will be unable to fully pay their tax obligations on time:
Filers Should First Be Sure to Maximize Tax Deductions
The 2009 American Recovery Reinvestment Act is loaded with several tax deductions and tax credits aimed at middle and lower income families as well as small businesses. Before seeking any personal or corporate income tax relief, filers should make sure that they are taking full advantage of any eligible tax breaks.
Filing for a Tax Extension with the IRS
Individual and corporate tax filers who are unable to cover the full amount of their tax liabilities should nevertheless make sure to complete their tax return or file for an extension by April 15th using IRS form 4868. The extension will give filers an extra six months to file their tax return and will help them avoid paying the “failure to file” penalty fee. Filers seeking an extension should still make every effort to pay what they can by the 15th of April since the remaining balance will accrue interest and late payment fees.
With an extension, the IRS will then request that filers offer a good faith estimate of the amount they expect to owe and that they pay whatever and whenever they can. Approximately 45 days later, the IRS will send an invoice for the outstanding balance, and will go through two or three more billing cycles before requesting from the filer a formal payment schedule.
Installment Payments for Outstanding Tax Obligations
Those filers who expect to fulfill their tax obligations yet need to pay it slowly over time, can request a formal installment agreement using IRS Form 9465. This form can be filed separately or sent with the tax return in April. With installment payments filers can indicate how much they can afford to send the IRS each month and on what day they will want to make these monthly payments.
The IRS will generally accept an installment agreement if the amount owed is less than $25,000 and the balance will be paid within five years. For filers who owe less than $10,000 and fulfill other requirements, acceptance is guaranteed.
Filers should be aware that they will be charged a small fee to set up the installment plan (between $50 to $100 depending on the details of the request), and interest as well as other penalties will be assessed until the tax obligation has been completely repaid.
In some circumstances, the IRS may even allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement, if the filer is experiencing financial hardship.
Applying for a Tax Settlement with the IRS
For filers who cannot repay the full amount owed even with an installment plan, the IRS may accept an Offer In Compromise. Much like a debt settlement that one would obtain on an outstanding credit card bill, the tax payer would offer to pay an amount that is less than the actual sum owed in order to settle the tax obligation immediately.
Filers seeking the tax settlement option will need to complete a financial statement along with other important paperwork and send it to IRS for a review. In order for the settlement to be accepted, filers must provide a significant amount of proof of their inability to cover the total amount owed.
For more information on the delayed or partial payments of tax obligations and income tax relief, filers should make sure to check out the IRS website and obtain the assistance of a qualified tax specialist.
Fixing Past Do Taxes
Past due taxes are any taxes that remain unpaid after the filing deadline of April 15th. Individuals can find themselves in the position of owing past due taxes for many reasons; from an from an unexpected illness that prevents an honest person from timely filing their return to the career criminal who has never filed a tax return and never intends to. In some cases the taxpayer could be missing out on a possible tax refund but in other many others people are simply trying to avoid paying their tax obligations and are only interested in their own financial gains with little concern for the people they are defrauding and its consequences.
Consequences and Penalties of Past Due Taxes
The consequences for past due taxes vary as greatly as do the reason for the past due taxes and amount past due. Plainly speaking failing to file taxes is criminal behavior. An individual who has past due taxes can expect anything from a slap on the wrist paltry penalty fee to wage garnishing to lengthy prison sentences and seizure of any and all assets. In general a taxpayer can avoid almost all consequences of past due taxes simply by filing any past due tax returns as soon as possible, as long as they are filed before the Internal Revenue Service catches on that they have not been filed. If you owe millions and have not filed any taxes in years, you can expect the Internal Revenue Service to prosecute you to the fullest extent of the law with as much publicity as possible in order to scare others into filing and paying what they owe in a timely manner.
What Should You Do if You Have Past Due Taxes
As stated previously if you have past due taxes, whether you would have received a refund or if you owe thousands of dollars, you need to get the proper tax forms filed as soon as possible. Even if you have no practical idea of how you are going to pay the amount owed. It is always in your best interest to file unfiled tax returns, as soon as possible, and do everything in your powers to demonstrate that you are a responsible tax payer and are willing to comply with all tax laws. Failing to file taxes and ignoring the IRS and their attempts to work with you to collect whatever is owed will only force them to take all appropriate actions under the law. Failure to file tax returns for a period of greater than three years will forfeit an individuals right to any tax refunds. As far as the courts are concerned past due tax debt supersedes all other forms of debt. What this means is that even if you are filing bankruptcy, past due taxes are the first debt that will be paid off through the process of the bankruptcy proceedings.
The Internal Revenue Service may seem like the most evil entity ever created, there primary purpose is to take peoples’ money and turn it over to the government, dealing with the Internal Revenue Service can be absolutely torturous, but I assure you they are not evil. If you chose to earn money in this country then in most instances you will be obligated to pay taxes on those earnings. If you chose not to pay those taxes, you could face forfeiture of any possessions and future earnings of you can cooperate with the powers that be and pay what you owe, if you can’t pay it all at once they will gladly put you on a payment plan and charge you interest. For the best advice anyone who finds themselves in any type of tax predicament should consult a certified tax professional immediately.
IRS Tax Settlement: What is it?
A tax settlement is when a taxpayer settles their tax liabilities through one of the IRS programs. The IRS offers settlements to taxpayers that are struggling with their tax debts or have valid reasons to abate their penalties. The IRS offers several different options for taxpayers to settle their taxes owed. The main factor the IRS takes into consideration when determining if the taxpayer will qualify for a tax settlement is their financial situation. The IRS tax settlement that a taxpayer qualifies for is dependent upon their unique financial situation. The IRS prefers individuals to pay their taxes owed in full, but they will make exceptions for certain circumstances.
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Let US Tax Shield Solve your Tax Problems
Taking on the IRS alone is never easy nor is it recommended. Those suffering from tax debt issues endure a daily struggle. But with US Tax Shield on your side, you never have to worry! US Tax Shield is your ultimate source for IRS tax debt solutions.