Can a property be seized if you owe back tax to the IRS?

by Mounica Kota | Oct 12, 2020 | IRS, owe taxes, property tax, tax filing, Tax Payers, Taxtips

Can a property be seized if you owe back tax to the IRS?

“Can the IRS seize my property if I owe taxes?” This is properly the first question every person who owes tax to the IRS enquires. The mere thought of losing their most valuable asset can create a sense of terror and fear in the minds of taxpayers who might have taxes due to the IRS. However, this might depend on why you owe taxes to the IRS, how much tax you owe, and your financial circumstances.

The IRS has the authority to seize the property of a taxpayer if the taxpayer has been neglecting or avoiding payment of taxes to the IRS. This process is otherwise known as Tax Levy. By Tax Levy, the IRS has the legal authority to seize a taxpayer’s property which might include a real estate for the settlement of taxes for which there have been several notices sent to the taxpayer.

When will the IRS seize your property?

Seizure of your property is the last method which the IRS might follow for the settlement of the back taxes.
Before the seizure of your assets, the IRS would take the below-mentioned steps for the tax settlement: –

The IRS would assess your outstanding tax and would issue a notice to you which would be demanding for the payment of the taxes.
If you have neglected the notice sent to you by the IRS, then
You will be sent a final notice of intent to levy and also a notice of your right to have a hearing before 30 days of the implementation of the tax levy.

If the IRS decides to take your property

The IRS would calculate and provide you with the minimum bid price of your property.
If necessary, you can challenge the price laid off by the IRS and state the fair market price of your property.
The IRS would issue a notice and make the announcement for sale of the property.
After the announcement, the IRS waits for 10 days before your property is sold off.
The entire amount obtained from the sale of the property would be used to recover the expenses incurred in the property seizure, selling of the property, and payoff of your tax debts.
You will obtain a refund if any amount is left out after the sale is over and if any excess money is left out.

Will the IRS visit your home?

The IRS representative can visit you for tax-related discussion only in circumstances such as

You owe taxes to the IRS and there is a need for a discussion.
There is an audit process
If there is a criminal investigation needed

However, there has been an increase in the fake IRS visits and tax scams lately which urges the taxpayers to be aware of their rights. You have the right to verify whether the IRS representative is authorized or not by asking for their credentials.

What are the other properties which the IRS can seize?

By a tax levy, the IRS can be able to seize the below-mentioned properties.

Real estate
Your vehicle
Wages by Wage Garnishment
A levy can be put up on your bank account
Investments and collectibles

Can you get back your seized property?

In case, you want to get back your seized property you would have to take some immediate action for resolving the tax debt. You must get in touch with the IRS to request a release of your seized property. Moreover, help from a tax professional would help you in the expedition of the process. In case the IRS would not approve your request for the release of the seizure, you can have an opportunity to appeal against it.

There are certain circumstances in which the IRS would have to undo the seizure of your property.

Your seizure can be released if you have fulfilled your tax liabilities.
If the tax collection period got completed before the seizure of your property was done.
If you have enrolled in an installment agreement program and the agreement does not allow the seizure of property.
If by the release of your property, you would be able to cover your tax balance.
If by the seizure of your property, you would be facing some economic hardships and would not be able to avail of the necessities of life.
If the value of the property seized by the IRS would exceed the tax owed and the release of the property would not prevent the IRS from the tax collection.

Protection of your assets from the IRS

If you want to avoid any kind of trouble with the IRS, then you must be careful about the rules. Either paying of your taxes or responding to the IRS notice, everything must be done on time and carefully.

Some of the basic steps by which you can take to prevent a tax levy are:-

Find out methods by which you can utilize your finances to cover up your tax debts.
In case you are not able to pay off your entire tax debt in full, then you can enter into an installment agreement.
You can check with the IRS if it is feasible to classify your taxes as uncollectible.
You can also try to request the IRS for an offer in compromise.

Conclusion

As a US taxpayer, you must fulfill your civil responsibilities on time. Ignoring or neglecting the notices or communication obtained from the IRS can lead to serious consequences. So, you must abide by the laws, regulations and must take matters related to the IRS quite seriously.

Do you owe taxes to the IRS?

by Mounica Kota | Aug 9, 2020 | IRS, owe taxes, penalties and interest, taxes

Do you owe taxes to the IRS?

There can be scenarios when you realize that you owe taxes to the IRS after you have finished your tax returns or you owe more than what you can afford at the moment. However, you should not panic in such circumstances and must try to find out options by which you can pay off your taxes.

In the first place, you must find out how much tax you owe to the IRS.

How much do I owe to the IRS?

You can use the tax refund calculators to find out about the tax you owe to the IRS. By the time you complete your tax refund, you would know exactly how much you owe to the IRS. You must check out all the deductions and credits carefully which you think you are qualified for. Moreover, you can compare your tax returns of the previous year with that of this year and find out about the changes. However, if you are obtaining a mail from IRS about back taxes then you can further investigate it by checking with the IRS.

File an extension

You can file an extension to complete your tax return by submission of Form 4868 to the IRS. You can check out for any deductions you might have missed or any miscalculations which you might have made while filing your tax returns. It is advisable to take assistance from an experienced tax professional to find out any deduction or credit which you might have missed. You should try and submit your Form 4868 by the deadline based on whatever you think you owe. You must try to pay as much as you can otherwise you might accrue penalties and interest.

Options for payment

Your payment to the IRS can be done by the below-mentioned methods.

The Electronic Federal Tax Payment System – This system is being operated by the Treasury Department to process the federal tax payments. You must set up your account by using your bank account information and then make your payments. Payments can be made related to different tax obligations such as estimated tax, extension payments, tax balances for previous years, etc.

IRS Direct Pay – You can pay your tax bills directly from either a savings account or a checking account by using Direct Pay. By Direct Pay, taxpayers would be able to schedule tax payments up to 30 days in advance. Payment can be canceled or changed before two business days of the scheduled date.

Credit cards or Debit cards – You can make your tax payments by using credit or debit cards, phone, or by any mobile devices. These payments would be processed by a processor and convenience fees would be charged by the processor. You can download the official mobile app of the IRS i.e. IRS2Go and make your payments conveniently.

US Postal Services – This is the conventional means of making tax payments. You can send your money to the IRS in an old-fashioned manner by mailing the payment check.

Minimizing penalties and interest

Huge tax bills can be troublesome and if you have penalties/interest on top of the original amount, then it would add to your hardships. So, you can minimize these penalties and interest can be minimized in the below-mentioned ways:-

Exceptions to the underpayment of tax penalties – In case you have underpaid your tax this year but you owed substantially less tax the previous year, then you would not be paying penalty for the underpayment.

Abatement of penalties – You can write a letter to the IRS and explain your situation. This can lead the IRS to reduce your penalties or interest.

Pay quickly – If you owe to pay tax to the IRS, then you should not wait until the deadline to file your tax returns. You can send an estimated tax payment or file your tax returns early and pay as much as you can.

What can I do if I can’t pay my taxes?

In case, you are not able to pay your federal tax immediately, there are certain options provided by the IRS which you can use to make your tax payments systematically.

Installment Agreement – You can file Form 9465 which is known as the “Installment Agreement Request” to set up installment payments with the IRS. The installment agreement form can be completed online by using the Online Payment Agreement Tool.

If you owe $50,000 or less in the form of combined tax, penalties, and interest and have filed all required returns, you can apply for the Monthly installment agreement online.
Businesses can also apply for this online if they owe $25,000 or less in combined tax, penalties, and interest for the current year or the liabilities of the last year and have filed all required returns.

Offer in Compromise – This method should be used as an extreme last resort. IRS would negotiate back taxes by Offer in Compromise and your tax bills can be settled in less than what you owe.

Conclusion

Hence, these are some basic tips and steps which you must follow if you owe taxes to the IRS for easier and faster resolution of your tax-related issues.

References

How to start a business as an NRI in the US if you owe taxes?

by Mounica Kota | Aug 6, 2020 | business incorporation, NRI, owe taxes, tax considerations

How to start a business as an NRI in the US if you owe taxes?

As an NRI, if you are planning to launch your own business but you owe taxes and are not sure about how to proceed then you might find yourself in a confusing situation. In this scenario, it depends if your situation would be affecting your ability to start or launch a business. Your tax debt may not prevent you from starting a business; however, it can affect your goodwill and even your ability in obtaining loans for your business.

Possibilities of business incorporation

Even if you owe taxes to the IRS, you would still be able to incorporate your own business. Generally, corporations and the LLC business structures would allow you to separate and also protect your assets. If you are planning to launch your own business, you must have a very clear distinction between the business and yourself as an individual. By the process of incorporating or forming an LLC, it is implied that you are eligible to run your business without any fear of your personal assets being seized due to your business debts.

If you consider the scenario from a tax standpoint, it is much easier to pay off or rather manage taxes if your expenses for business re kept separated from your personal expenses. Corporations and LLCs can deduct eligible expenses like salaries and supplies; however, it would become more complicated if your personal expenses and business expenses are mixed up. You must work very closely with a tax advisor or tax professional to help you in the proper set up of your company.

Financing of your business when you owe taxes

When you apply for the financing of your business, your business loan application could be affected by your personal credit. Usually, financers would evaluate in detail your personal credit and financial history before granting you a business loan.
If you have a high amount of tax debt or you have not paid your taxes then your credit score might decrease steeply.
If there is a tax lien against you then it would remain on your credit report for a long time even when you have paid the tax.

4. If you think your tax debt can create an issue for the financing options available for your business, you can consider the below-mentioned financing options.

Short term loans – You can obtain a short term loan if your business has a sustainable cash flow. This kind of loan places greater emphasis on the revenue of the company rather than on your credit score.

Term loans – For term loans, you would need good personal credit. Moreover, these loans would give you a lump sum money which you would have to repay with a fixed interest rate.

Accounts Receivable Financing – If you are waiting on your unpaid invoices to pay your business expenses, this type of loan is the best option for you.

SBA Loans – SBA loans are highly sought as their lower interest rates are added up with longer repayment terms.

Resolve your unpaid taxes

If you owe back taxes to the IRS, then the IRS has the authority to collect the taxes by seizing your property through a tax levy. By a tax levy, the IRS is allowed to seize your bank account balances, your wages, real estate, automobiles, retirement accounts, and any other assets. However, you can still work and earn.

You will have to discuss your unpaid taxes with the IRS. If you have negotiated with the IRS and decided that you would be paying your debts using an installment agreement, then you would be able to start your own business. However, you must keep in mind that if you try to hide your assets from the IRS’s levy by using your business as a front then it is illegal.

Some other tax considerations

From the perspective of business structures, there are four types of business structures and each one would be having a different influence on business taxes.

a.Sole proprietorship – If you are setting up your business as a sole proprietorship, your business would not be separate from you as an individual from a legal perspective. By this, your business would not have to pay business income tax as you would have to report your self-employment income only.

b.LLC – LLC means Limited Liability Company and by this, your company would get its own identity and status different from your personal identity. You can receive more protection and financial benefits. Your LLC would not have to pay business income tax and you would only pay personal income tax.

c.S-Corp – It is also a business structure that is not liable for business income taxes and all the business earnings would pass through the owner.

d.C-Corporation – C-Corporations might be a publicly-traded company or a small company, this business structure requires you to pay business income taxes.

Conclusion

Hence, even if you owe taxes to the IRS it does not mean that you will not be able to set up a business of your own. You should not ignore your tax obligations, connect with experienced tax professionals for tax resolution services, and get ready to pursue your dreams of starting your own business.