5 Important Tips to Surviving an IRS Levy, Tax Strategies

5 Important Tips to Surviving an IRS Levy, Tax Strategies

Key Tips to Surviving an IRS Levy 

When the Internal Revenue Service wants to enforce an outstanding tax liability or penalty against a Taxpayer, they have many different tools available to do so. Sometimes, the IRS will issue a Notice of Federal Tax Lien (NFTL), Seizure, or Passport Revocation. But, more often than not, the Taxpayer will receive several threatening notices that the IRS intends to issue a Notice of Levy. Before, the IRS can go into a Taxpayer’s bank account and levy the funds (or levy their wages), there are multiple notices the IRS must send the Taxpayer first. In the meantime, the Taxpayer can usually resolve the issue before it turns into an actual levy. Let’s look at five (5) key tips for surviving an IRS Levy.

What Type of Notice Did You Receive?

When the Internal Revenue Service wants to issue a levy against the taxpayer’s wages or bank account for example, they do not immediately levy the money. Rather, the taxpayer will receive several proposed notices of levies which are usually known as 504 letters and 503 letters. These are warning letters to put the Taxpayer on Notice that the IRS intends to pursue a levy.

Was the Levy Proper or Not?

Sometimes, the Internal Revenue Service makes a mistake and may begin issuing notices or even an actual levy when the levy should not have been issued in the first place. For example, the taxpayer may have already paid any outstanding taxes or penalties, but the IRS office did not process it properly. In this type of situation, the taxpayer should take immediate action.

Should You File an IRS Appeal?

If a notice of levy was issued against the taxpayer, the taxpayer still has options available to try to challenge the notice. At some point, the taxpayer will receive an IRS Notice or Letter that authorizes them to submit an appeal. Taxpayers may want to consider appealing the levy coming but they may also prefer to wait until they can pursue a Collection Due Process Hearing which oftentimes may put the taxpayer in a better position than an appeal (but not always).

Should You Wait for the CDP Opportunity?

With a Collection Due Process Hearing, the taxpayer has the opportunity to present their case before a settlement officer to challenge the levy and even make a reasonable cause challenge if the facts are sufficient to do so. This becomes common in situations in which a taxpayer receives a proposed levy because of a penalty stemming from international information reporting noncompliance, such as filing a late form 3520 or 3520-A.

Should You Enter an Agreement with the IRS?

For taxpayers who legitimately owe their taxes or penalties but do not currently have all the money available to make payment, they may want to consider entering into an agreement with the IRS instead of allowing the IRS to issue the levy. That is because if the taxpayer does not have sufficient funds to satisfy the levy, the taxpayer may become subject to other fines and penalties, such as a notice of federal tax lien placed on them or a denial or revocation of their U.S. passport.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely gettidg into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.

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