Arizona

Tax Debt and Bankruptcy Blog

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By Michael S. Anderson of Anderson Tax Law logo for Arizona tax attorney Michael S. Anderson P.C.
  • IRS LEVY: 13 Situations When the IRS Can’t or Won’t Levy your Assets or Garnish your Paycheck

    IRS tax debt will result in an IRS levy unless one of following situations exist.

    1. WHEN AN IRS INSTALLMENT AGREEMENT IS IN PLACE

    If an IRS payment plan has been arranged or you have been able to convince the IRS to place you on non -collectible status and you are following through with the agreement, and your situation hasn’t changed dramatically, the IRS cannot engage in collection activity.

    2. THE INSTALLMENT AGREEMENT HAS FAILED – 30 DAYS AFTER ITS TERMINATION

    Normally, the IRS has “retracted” the payment plan because you have failed to make a payment. There are other reasons as well, and if any of them apply the IRS CANNOT collect from you for a 30-day period after it sends the termination notice.

    3. APPEALING THE 30- DAY NOTICE AFTER TERMINATION OF THE INSTALLMENT AGREEMENT?

    If you timely appeal the termination of the installment agreement, the IRS cannot collect until the appeal is heard.

    4. IRS OFFER IN COMPROMISE IS UNDERWAY

    The IRS won’t collect after you file a proper offer in compromise request and during it’s appeal.

    5. PRIOR TO “FINAL NOTICE OF INTENT TO LEVY” ISSUANCE

    In order for the IRS to collect on an assessed debt, it must send you via certified mail its “Final” notice of intent to levy account or garnish wages. It can’t collect until it has done this unless it can show that the situation meets the requirements for “jeopardy” collection. An appeal can be filed when the Final Notice is received. Collection action is stayed during this appeal process as well, which may last for a number of months.

    7. BANKRUPTCY

    The Bankruptcy Code is a powerful document. Section 362 says that a bankruptcy filing stops virtually all collection activity, even IRS collection activity. A side benefit is that it also can help to reduce or eliminate certain tax debts.

    8. STATUTE OF LIMITATIONS ON COLLECTION

    The IRS only has 10 years to collect a debt from the date it is assessed. More people than you might think use the 10-year rule to their advantage by combining with an IRS payment plan or non-collectible status that pays a fraction of the debt before the statute removes the remainder.

    9. LOW ASSET VALUE OR PERSONAL ASSETS.

    The IRS won’t take assets if there won’t be “”sufficient net proceeds” after the sale of the asset to apply to the debt. The IRS is prohibited from taking household goods and furniture valued to $7900.00. It is also barred from taking child support, clothing, or unemployment checks.

    10. YOUR BUSINESS ASSETS

    If you have personal assets that will pay the debt and you own business assets that are being used to keep your business running and income flowing, the IRS won’t take the business assets without approval from the IRS Area Director.

    11. INNOCENT SPOUSE CLAIM FILED

    If you meet the requirements to file an Innocent Spouse claim, and you file it properly the IRS should stop collection activity.

    12. TAX DEBT IS INCORRECT

    Try to provide some proof to the IRS that the debt calculation is wrong. This should slow down collections. (IRS Policy Statement 5-16)

    13. SUFFERING A HARDSHIP

    If you are facing a real hardship as a result of the collection activity, i.e. inability to pay for basic expenses, keep the lights on, pay rent; the IRS will temporarily suspend collection activity while you prove your financial condition.