Tax Collections: Liens, Levies, Penalties, License Revocations, and Innocent Spouse Relief
With the tax gap growing and government resources continuing to dwindle, the reliance of the Internal Revenue Service and other taxing authorities on already powerful collection tools continues to grow. For taxpayers with significant and continuing noncompliance, the Internal Revenue Service is willing to pursue enforced collection actions including levy actions, garnishment, and foreclosing on liens. On the other hand, for business and individuals that understand the process, these actions can be delayed or minimized. Crepeau Mourges is experienced with the tools available to the taxing authorities and utilizes taxpayer-friendly procedures to combat these actions and to allow taxpayers to seek other avenues to address compliance.
Tax Liens: Avoiding Public Notice of a Tax Problem
After taxes and penalties have been assessed, taxpayers begin to receive a slew of collection notices from the Internal Revenue Service. After payment is demanded by the Internal Revenue Service, an “invisible” lien attaches to all property of the taxpayer. That means that, even without filing a notice of tax lien, the taxing authority can use enforcement tools to satisfy the amount owed. But those notices typically are not what first get a taxpayers’ attention. Instead, many taxpayers do not take any action until, unfortunately, a Notice of Federal Tax Lien (NFTL) is filed.
An NFTL protects the interest of the Internal Revenue Service with respect to a taxpayers property vis-à-vis other creditors. As a public filing, lenders and other third parties take notice and may be less willing to offer affordable credit or engage in business with a tax debtor. This can have a significant negative effect on an individual or business. And when a business or individual goes to sell property, a lien search will result in a transaction being delayed or significant expected proceeds being turned over to the taxing authority. Crepeau Mourges is aware of the significance of tax liens and their ability to sidetrack a business; however, we also have a wealth of experience in the procedures that can be used to release, subordinate, discharge, and withdraw these filings. We are prepared to use collection options to limit potential lien filings by utilizing collection appeal procedures and by negotiating workable collection alternatives.
Levies: Limiting the Ability of the Taxing Authority to Seize Your Property
For some, not even the filing of a tax lien is enough to spur action. In such cases, the Internal Revenue Service will not hesitate to seek use another of its tools provides the levy. The ability of taxing authorities to use administrative levies provides a significant leg-up on other creditors. Whereas other unsecured creditors might need to file suit, obtain a judgment, and execute on that judgment to collect a debt, taxing authorities do not need to go through such a process. So long as the Internal Revenue Service has made proper notice and demand for payment and has issued required pre-levy notices – such as the Final Notice of Intent to Levy – it is authorized to seek repayment by garnishing wages, garnishing portions of Social Security payments, attaching federal contractor payments, levying on bank accounts, and seizing and selling other property.
Due to the severity of levy and seizure actions, taxpayers should promptly contact an attorney at Crepeau Mourges if they are faced with threatening notices. We can quickly identify any prior or imminent collection action and limit their effect. Crepeau Mourges has significant experience working with revenue officers and can frequently work through alternatives to levy action. Depending on the situation, we may be able to avoid such action by exercising appeal rights – whether Collection Due Process or Collection Appeals – or by proposing collection alternatives. We have successfully worked to release levies and garnishments in some matters and can limit the impact of continuing levies.
Penalty Abatement: Limiting What You Owe
Aside from enforced collection actions, the Internal Revenue Service uses a number of significant penalties to increase tax compliance. These penalties include failure to file, failure to pay, failure to deposit, accuracy-related penalties (negligence and fraud), and a number of information return penalties. For some well-meaning taxpayers, compliance missteps and the attendant penalties make up a majority of what they might owe to the Internal Revenue Service. After receiving many collection notices and trying to pay their taxes in full, taxpayers can become despondent when they are unable to understand the nature of these penalties.
Crepeau Mourges has significant experience working with taxpayers to reduce the impact of penalties. We can explain the nature and amount of these penalties – whether based on delinquencies, inaccuracies on the return, or failure to file little-known attachments to the tax return. More importantly, we can employ a number of techniques to minimize these penalties for you. In examinations, we strongly advocate for our clients to avoid having penalties assessed in the first place. When Crepeau Mourges is engaged in a tax collection matter, we consider the need for penalty abatement requests, audit reconsiderations, and Offers in Compromise (Doubt as to Liability). If necessary, we will advocate for these remedies in administrative appeals and litigation. We evaluate the viability of defenses to the assessment of penalties – such as reasonable cause, the statute of limitations, and other procedural issues – argue for administrative waivers (e.g., First Time Abatement), and can challenge the underlying tax in order to reduce the impact on you. Our experience is broad and we are prepared to use all the tools at our disposal to further your interests.
Revocation of Licenses and Passports: Protecting Your Livelihood
In recent years, the Internal Revenue Service and state taxing authorities have ramped up information sharing to further tax collection efforts. Aside from the filing of liens and issuing levies, the Internal Revenue Service is now authorized to effectively revoke and suspend the passports of delinquent taxpayers. At the state level, taxing authorities are increasingly suspending business licenses, professional licenses, driver’s licenses, and vehicle registration in order to enforce compliance. Crepeau Mourges has assisted clients facing each of these actions and can devise a strategy to avoid or limit their impact on you or your business.
Most states regulate the manner in which businesses and professionals operate. Frequently, these regulatory bodies issue licenses that require renewal on a periodic basis. For professional licenses – such as those for lawyers, accountants, doctors, nurses, and many others – a board or other state agency can limit or suspend the ability to practice for acts deemed detrimental to the profession. Without a license, a business or professional simply cannot operate. Knowing this, many states have implemented collection tools that require agencies to revoke or suspend licenses for those with pending tax filings or delinquencies. Even for those that do not hold one of these types of licenses, many states can revoke or suspend driver’s licenses and vehicle registration for significant tax delinquencies. If you have significant state tax delinquencies, you should act proactively to avoid or mitigate these significant consequences. Crepeau Mourges represents clients with these types of problems on a routine basis. We will advocate to have your license reinstated, either by proposing an acceptable installment agreement or by correcting an error. For professionals risking potential long-term consequences as a result of filing or payment delinquencies, we can advocate on your behalf before these regulatory bodies and devise a strategy to get you back on the road to compliance.
Perhaps leaning on the successes of these state enforcement mechanisms, in recent years Congress provided the Internal Revenue Service with the ability to suspend and revoke passports for those with “seriously delinquent tax debts.” A tax debt becomes seriously delinquent when it exceeds about $50,000, when it has been outstanding long enough for administrative appeal rights to expire, and when a taxpayer has not taken action to remedy the situation. When that occurs, the Internal Revenue Service will certify the issue to the Department of State which, in turn, will not allow for a passport to become renewed or used until rectified. Crepeau Mourges has assisted many taxpayers faced with the potential for passport suspension and revocation. We work proactively to avoid this classification by employing administrative appeal options, other options for tax relief (such as innocent spouse relief), and by negotiating agreeable collection alternatives. Where revocation has already occurred, we can work with taxpayers to achieve decertification and have their liberty to travel restored. If you receive notification of a significant tax debt or a threat to certify a debt as seriously delinquent, you should contact the attorneys at Crepeau Mourges to fully preserve and protect your rights.
Innocent Spouse Relief: Limiting the Tax Debt of Spouses and Ex-Spouses
We have seen it many times before. A client approaches us after receiving a large and total unsuspected tax bill from the Internal Revenue Service or state taxing authority. The client goes on to tell us that their spouse (or former spouse) operated a shady business venture that should be responsible for the tax and that they did not generate income during the period at issue. The same client might tell us that they worked the issue out in a separation or divorce agreement and their ex-spouse said they would pay the liability in full; however, they still continue to receive threatening letters from the taxing authorities. Crepeau Mourges represents many taxpayers like this. We can help you to avoid these problems altogether or, if necessary, can utilize innocent spouse and injured spouse relief to achieve justice for you.
Unfortunately, many taxpayers in these situations are unaware of the process. When a married couple files an income tax return as married filing jointly, each spouse becomes jointly and severally liable for the tax and penalties that are due. That means that the taxing authorities can pursue either or both of the spouses for collection, regardless of who is the cause of the tax or who has the ability to pay. The Internal Revenue Service deems all individuals responsible for the contents of their tax returns. That means, over and above income and tax reported on a return, spouses can also be held to account for any later adjustments or penalties. This can be a big problem for those that have no actual ability to affect how their tax return is filed (i.e., as married filing separately as opposed to jointly), for those that are abused by their spouse, or are under financial control by their spouse.
Fortunately, even if a spouse is saddled with a tax problem caused by their spouse, they can often seek relief from collection. One way to eliminate this responsibility is by claiming “innocent spouse relief.” Although there are three forms of relief with significant eligibility and documentation requirements, the Internal Revenue Service may generally grant relief to those who were not responsible for the tax debt, did not know of the source or nature of the tax debt, or where equitable factors support granting relief. While the attorneys at Crepeau Mourges have achieved relief on behalf of clients through each of these avenues, we are most proud of our successes in arguing for the application of equitable relief in administrative appeals and tax litigation. In many cases, achieving relief from income taxes is only the start of rectifying a bad situation caused by a debilitating or abusive relationship. For other individuals in these circumstances, Crepeau Mourges will employ injured spouse relief to obtain additional financial remedies for affected parties.
Call Crepeau Mourges to Help Resolve Your Tax Problems!
If you are faced with a significant tax debt or are receiving threatening notices, you do not need to go it alone. Contact Crepeau Mourges for a no-cost initial consultation. We will put your issues in perspective and explain the many opportunities to resolve your problems. We will work to get you back on your feet, put your tax issues behind you, and help you to move forward with your life.