Massachusetts tax attorney Theodore L. Craft has been quite effective in obtaining concessions from the IRS in tax collection enforcement matters. As a strong source of Boston tax collection information, he helps guide clients through IRS procedures. He does not abuse the system. Mr. Craft has conducted credible negotiations with the IRS in this area for many years. He understands that any promises that are made must be genuine.
When attorney Craft engages in collection forbearance negotiations with the IRS, he will have first helped his client to embrace cooperation and efforts to qualify IRS concerns about financial assets. The fairness of a proposed bargain based on financial evidence is critical. The client cannot be set up for failure. The IRS cannot give away the government's money when the taxpayer owes money and has the ability to pay. However, Mr. Craft defends clients in litigation, if necessary, against the heavy hand of the IRS.
IRS Enforced Tax Collection
A taxpayer whose assets and income are under attack by IRS enforced tax collection is not without legal defenses. A variety of procedural actions within the IRS and in the courts are available to postpone or restrict such collection activity.
Tax Collection by Private Debt Collection Companies
The American Jobs Creation Act, which became effective on October 22, 2004, permits private debt collection companies to obtain taxpayer financial information and to offer installment plans for payment of delinquent taxes. However, the IRS revenue officer is the most powerful collection arm of the IRS.
Tax Collection by an IRS Revenue Officer
The revenue officer's powers to distress a taxpayer who is delinquent in tax responsibility are awesome. The revenue officer has the authority to file a notice of federal tax lien (which defeats any secured creditor or judgment not on record as required by law before the date of the tax lien) or Notice of Intention to Levy.
Federal Tax Liens
The federal tax lien is created by assessment of tax, notice and demand for payment, and nonpayment. Even before notice of the federal tax lien is filed, there is a general rule of attachment under the Internal Revenue Code that gives the United States a claim upon all property and rights to property of a taxpayer. In addition, anything acquired by the taxpayer after the lien arises is immediately attached by the general tax lien.
Spouses, tenancy by entireties and federal tax liens: In United States v. Craft, 535 U.S. 275 (2002), the United States Supreme Court decided that the federal tax lien of one spouse resulting from the separate tax liability of the other spouse attaches to the property held in a tenancy by entireties. Thus, individual rights in the estates sufficient to constitute property or rights to property exist for purposes of a tax lien under Section 6321 of the Internal Revenue Code.
Homestead exemption and federal tax liens: The homestead exemption does not preclude attachment or execution of the federal tax lien. Even if only one spouse is liable for the tax debt and the nontaxpayer-spouse has a homestead interest, the federal tax lien attaches to the entire property and that property can be seized by the IRS and the interest sold in an administrative or judicial sale.
Alimony and federal tax liens: Even alimony payments are subject to attachment by the federal tax lien (child support payments, on the other hand, are not because these are the property of the child and not the taxpayer-parent).
Levy Authority and Writ of Entry
The IRS may proceed to levy upon property to collect a tax liability after proper notice. Under the levy authority, the IRS can seize property held by the taxpayer or a third party. There are appeal procedures during enforced collection proceedings (a collection due process appeal or an offer in compromise), during the prosecution of which the IRS is prohibited from levying upon a taxpayer's assets.
The IRS may obtain a writ of entry to enter private premises to seize property. A writ of entry, however, is only necessary if the IRS needs to obtain access to areas where the taxpayer has a reasonable expectation of privacy.
Levy Against Taxpayer's Interest in a Bank Account
The most common levy in the IRS's toolbox of collection devices is a levy against the taxpayer's interest in a bank account. If administrative resolution of the tax liability is unlikely, and no administrative agreement can be reached with the IRS, the depository institution, after holding the levied funds for 21 days, is required to turn over the funds to the IRS to the extent of the levy.
Suspending Enforced Tax Collection and Enhancing Tax Collection Probability
A taxpayer may be in a bargaining position with the revenue officer in charge of a case if negotiations to suspend enforced collection appear to enhance collection probability. This assumes that all tax returns for all periods subsequent to the years of the unpaid liabilities have been filed. The one critical aspect of IRS enforced collection to be clearly understood is that the IRS will not permit a taxpayer to pyramiding tax liability; that is, the IRS will generally not negotiate a forbearance of enforced collection if the tax compliance situation is chronic and repeated.
Contact a Massachusetts Federal Tax Liens Attorney
For more information about federal tax liens and other tax collection measures, speak with experienced legal counsel. Contact a Boston tax lawyer online or call 888-TAX-RISK to schedule an initial consultation to discuss your situation.