When it comes to tax law, it is natural to have many questions. Tax regulations are complex, so staying up to date requires asking the right tax law questions. So, what are some of the most common tax law questions? Continue reading to find out the answers.
What Is Tax Law?
Understanding Tax Law
Tax law is the legal framework that dictates what and who gets taxed, how much, and how it’s calculated and paid. Through government agencies such as the IRS, the government collects taxes from individuals and businesses to run public service programs, fund infrastructure, and support other expenditures.
Do I Need a Tax Attorney?
Situations Where Legal May Be Beneficial
What determines the need to hire a tax attorney is the severity of your tax issue. For example, issues such as an IRS audit, tax fraud, and collection actions are matters where hiring a tax attorney can be extremely beneficial. Tax attorneys have the knowledge and experience to help navigate the issue, communicate effectively with authorities, and represent clients in these challenging circumstances.
Tax Attorney vs. CPA
The main difference between a CPA and a tax attorney lies in their legal authority and focus. A Certified Public Accountant is a professional who can help clients with tax preparation, financial planning, and bookkeeping. A CPA, however, does not have the legal authorization to represent a client before the court. On the other hand, a tax attorney, who has gone through extensive education and real-world experience dealing with tax issues, has full legal representation.
What Happens If I Don’t Pay My Taxes?
IRS Collection Process
An IRS collection process starts with the IRS sending notices. The letters serve as a warning to taxpayers of the tax debt they owe and the payment they must make to satisfy the debt by the deadline. Not responding to IRS notices may result in more serious consequences, such as collection actions.
Possible Collection Actions
Collection actions entail the IRS pursuing the satisfaction of the debt by different methods, such as filing a federal tax lien and levies against your assets, wages, and bank accounts.
Why Acting Early Is Important
Acting early means you are preventing escalation. The faster you respond, the more options you have and the smaller the chance of getting your tax issues into a more complex and significant situation.
What Should I Do If I Receive an IRS Notice?
Don’t Ignore It
If you received an IRS notice, never ignore it. Notices won’t go away on their own. Instead, it will only make matters worse. If the IRS sends you a notice, respond accurately and in a timely manner.
Respond Promptly
Responding promptly means two important elements: time and accuracy. Respond before the deadline expires, but also provide the response accurately. A timely response that contains incorrect or incomplete information may not resolve the issue and could require further action.
When To Contact a Tax Attorney
When dealing with a complex situation, such as owing a large amount of debt or facing collection action, seeking help from a tax attorney is highly recommended. A tax attorney can help find suitable options reflecting your unique circumstances, so that your response is handled correctly. If you are unsure about what to do with any tax matters, calling a tax attorney is also a smart way to go.
Can the IRS Garnish My Wages?
How Wage Garnishments Work
A wage garnishment or wage levy operates when employers are legally required to withhold a portion of your wages to be paid to the IRS to help pay off the debt. A wage garnishment can continue until the full debt is paid or another resolution has been reached.
When the IRS May Garnish Wages
The IRS typically initiates a wage levy when you fail to satisfy the debt after being given many opportunities and options to pay it off via IRS notices.
Options for Addressing Garnishments
Taxpayers can get their wage garnishment released by paying off the total debt or reaching an agreement with the IRS to resolve the debt, such as establishing an installment agreement (IA) and an Offer in Compromise (OIC).
What Is a Federal Tax Lien?
Definition of a Tax Lien
A tax lien is the government’s legal claim against taxpayers’ personal and business properties. It is intended to ensure that the government has a safety net in case the debt remains unpaid. The lien can apply to assets you own now or acquire after the lien is filed.
How a Tax Lien Can Affect You
Having a tax lien attached to your name can negatively impact your credit score and create a situation where getting a new loan, selling or refinancing your property becomes incredibly difficult.
Can a Tax Lien Be Removed?
Yes, and the most effective and fastest way is by paying your tax debt in full. This will prompt the IRS to remove the lien within 30 days. The IRS may also remove a tax lien depending on the type of relief requested and the taxpayer’s situation.
What Is an IRS Levy?
Tax Lien vs. Tax Levy
A tax lien is the legal claim over your asset, essentially “locking” it in case tax debt remains unpaid, while a levy is the actual action of seizing the assets to satisfy tax debt.
Property the IRS May Levy
The IRS may levy different asset classes, including bank accounts, wages, physical properties (such as homes, vehicles, jewelry), and intangible assets, like retirement accounts and dividends.
Steps to Take if You Receive a Levy Notice
Receiving a levy notice is a serious tax problem, as it serves as the last warning before the government goes ahead with the seizure. You typically have 30 days before the IRS begins the levy. In this instance, immediate response is critical. Therefore, contact a tax attorney to find the best option to prevent escalation and find an effective solution for the long term.
How Long Does The IRS Have To Collect Tax Debt?
Collection Statute Basics
The good news is the IRS has a limited window for collecting taxes. However, it is still a significant amount of time. By law, through the Collection Statute Expiration Date (CSED), the IRS has 10 years from the date a tax is assessed to collect outstanding tax debt. Beyond this window, the remaining tax debt is legally wiped clean, and the IRS can no longer pursue the debt.
Situations That May Affect the Timeline
In certain events, such as when taxpayers enter into an agreement with the IRS that stops the government from actively seizing your property, like requesting a formal Collection Due Process hearing, filing for bankruptcy, or applying an offer in compromise, the 10-year window can be paused. But once that specific agreement ends, the clock starts again, effectively extending the expiration date.
Why Timing Matters
Understanding deadlines is an essential factor when building a strategy to resolve tax debt. How much time you have can influence your decision regarding what options are suitable and how much flexibility you have. Determining the time accurately helps you decide whether you should actively negotiate a settlement or set up a modest monthly plan.
Get Trusted Answers to Your Tax Law Questions
If you have any tax law questions and are unsure of how to go ahead with the issue you are currently facing, call a trusted and experienced tax attorney to assist you. Getting the right course of action can prevent escalation and save you a lot of money and stress. Contact Greenberg Law Group today, and let’s get all your tax matters sorted out effectively.