From IRS tax liens to bank levies to wage garnishments to outright closure of your business, or seizure of your home, the IRS has a number of powerful tax collection tools that could destroy your family’s finances. However, taxpayers have a great arsenal of tax resolution tools to help minimize the devastating effects of IRS’ enforced tax collections.

IRS Tax Liens

According to some IRS agents, IRS liens are the most powerful IRS tax collection tools of all. By filing a IRS tax lien, the IRS essentially gains an interest in virtually all of your property. Obtaining credit, or buying or selling real estate becomes very difficult. The IRS has the power to collect back taxes by seizing your property to satisfy tax liens. A IRS tax lien reaches all property interest of the taxpayer. Once a legal tax lien has been filed, the IRS may seize your property to satisfy the tax lien.

Offer in Compromise

The Internal Revenue Code authorizes the IRS to accept less than full amount of tax liability owed in any IRS civil or criminal case arising under the tax laws prior to the case's referral to the Department of Justice. For an Offer in Compromise to be accepted, the taxpayer must establish to the satisfaction of the IRS that the taxpayer either: has no means of paying the tax, or does not actually owe the tax.

The IRS will accept an Offer in Compromise when it is unlikely that the tax liability can be collected in full and the amount of the IRS Offer in Compromise reasonably reflects collection potential. An Offer in Compromise is a legitimate alternative to declaring a case as currently not collectible, or to a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the government.

An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons:

Doubt as to Liability - Doubt exists that the assessed tax is correct.

Doubt as to Collectibility - Doubt exists that you could ever pay the full amount of tax owed.

Penalty Abatement

If there were circumstances beyond your control that prevented you from paying your tax debt and led to delinquency, you can challenge the penalties and interest negotiate them down. Relief from penalties falls into four separate categories. They are:

Reasonable Cause - Mistake made by the taxpayer, ignorance of law, death, serious illness, unavoidable absence.

Statutory Exceptions - Simple or complex legislative tax code changes.

Administrative Waivers - Undue hardship, fire, flood, natural disaster, bad legal/tax advice.

Correction of Service Error - Mistake made by the IRS. Source IRS

Wage Garnishment

When the IRS or state has failed repeatedly to collect back taxes, they begin to seize assets. This process is called a "levy." When they attach wages, it’s termed a "wage garnishment." After providing either ten, thirty or sixty day notice through certified mail, they are legally allowed to seize bank accounts, demand payment from accounts receivable, take control of property for auction, and assume title on vehicles. Virtually anything of value can be seized to satisfy the outstanding debt.

Bank Levy

When the IRS or state has failed repeatedly to collect back taxes, they begin to seize assets. This process is called a "levy." When they attach wages, it’s termed a "wage garnishment." After providing either ten, thirty or sixty day notice through certified mail, they are legally allowed to seize bank accounts, demand payment from accounts receivable, take control of property for auction, and assume title on vehicles. Virtually anything of value can be seized to satisfy the outstanding debt.

Payment Plan

This program is for taxpayers and businesses who cannot settle their entire tax debt at one time and need to make payments on it. This means valuable time to catch up and escape the harassment and embarrassment of revenue officers and agents, allowing room to map out an affordable solution.

Innocent Spouse

If your spouse or ex-spouse understated the tax on a jointly filed return, you are eligible to be released from the obligation for the tax liability and the related interest and penalties. You must show that the understatement of tax is attributable to your spouse and that you had no reason to know of the understatement. Additionally, you must claim to be an innocent spouse by filing Form 8857 within 2 years after the IRS has begun to try to collect the tax from you.

Statute of Limitations.

The statute of limitations does not begin to run until a return is actually filed. Returns that are filed on time are generally subject to a three year statute, within which the IRS has 3 years to audit and assess additional taxes against the taxpayer. The 10 year statute for collecting taxes begin to run upon filing a return so that all tax returns should be filed timely to start the statute of limitations running.