With over 14 MILLION collections cases currently active at the IRS, and that number expected to grow exponentially after the COVID-19 fallout, do not feel like you are alone if you are the recipient of one of the IRS "love letters". My job at Serna Tax Solutions, LLC is to help clients navigate their way around IRS collections, and get the best result possible in their current situation. Whether that is a payment plan to get them off your back, an Offer In Compromise where we say "hey, I can't afford that bill, but here is what I can offer", or getting a lien lifted from a home so that it can be sold, there are many ways we can potentially deal with your IRS issue. That said, your options start to diminish the longer you wait to respond to those "love letters". Here is how the collection process works, and some things you need to know about each step:
Step 1: The tax is assessed
Some way or another, the IRS has determined that you owe them money. That can be the result of an audit, that can be the result of you not filing your tax return and them making one up for you, it can be because you didn't pay your taxes when you were supposed to, or any other myriad of reasons. The first step is that they will determine that you owe them money in one way or another.
Step 2: Billing notice is sent
Now that they have determined that you owe them money, they are going to send you a bill. The first letter is a pretty nice one. It basically says "hey, we think you owe us some money. Either send us the money, or send us a note explaining why you don't owe it." Pretty nice, huh? What happens now, is that most people ignore that letter. Either they don't open it at all, or they think "if I just don't respond it will go away. They will forget about little ol' me." WRONG. We move to step 3.
Step 3: A lien arises
The IRS now puts a lien over all of the tax payers assets. This lien is what we call the "silent lien". It exists, but they don't go about broadcasting it. You will however find out if you try to sell your house, or any other financed asset, because the bank will come back and say "you can't sell this. The IRS has a lien on it.". The notice will come out in a later step...
Step 4: Final Notice is issued, and an Intent to Levy
This is when the letters get not so nice anymore. Now, they say "Hey, this is your last shot. You owe us this money, or else we are going to start taking stuff.". At this point, you still have options available to work this out with the IRS. Yet, again, most people choose to ignore this... and we continue down the process.
Step 5: Notice of Federal Tax Lien is issued
This is when they officially send the notices out that they are putting liens on your property. You likely will know that this process has started, because you will start receiving spam from every "Let us help you" chain in your area. This is when your lien hits the lien lists which can be purchased, and are on record at the county. The lien is officially public. Once again... you still have options at this point to resolve the issue! And yet... once again, people choose to ignore this, and the process continues.
Step 6: Property seizure begins
This is the point where most people start calling for help. The IRS is officially garnishing wages, emptying bank accounts, and finding other creative ways to get their money.
Step 7: Step 6 continues until the issue is resolved
What does "resolved" mean? Either they have taken enough property to pay off your debt, OR you have engaged a professional to help come to an agreement with the IRS and they no longer have to seize property, because you are cooperating and paying them on agreed upon terms.
The moral of the story is: OPEN YOUR MAIL! STOP WAITING! IT WILL NOT GO AWAY ON ITS OWN.
If you need help with a tax issue, give me a call or email. I work with clients to help them sleep better at night knowing that we can work with the IRS, and take control of the situation again.
*Disclaimer: This post does not contain any tax, financial, or legal advice. These are simply concepts you should consider and discuss with your tax adviser. Without knowing your specific situation, and having an engagement letter in place, I cannot provide specific tax advice over an Internet post or video. To discuss your specific tax situation, feel free to send me an email to make an appointment for consultation.
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