Unfortunately, this feeling of hopelessness is an all too common feeling of clients in this situation.  This blog intends to provide educational articles about tax topics, rather than playing on emotions as many firms do in the tax controversy area.  The reality is that these issues are emotional.  Unfortunately, an emotional issue can trigger irrational decisions.  One irrational decision is buying into the promise of a solicitor that your tax problems are easily resolved because you “qualify” for a settlement.  The fact is that everyone can “qualify” for a settlement.  That’s the wrong analysis to start with.  And, when a firm is approached with a levy situation, it is premature to analyze whether or not a client qualifies for a settlement.

At the time a taxpayer is under levy, the proper analysis is whether or not the taxpayer can get immediate relief of some sort from the levy.  If the levy is affecting the taxpayer’s wages, then the taxpayer’s representative should work through a detailed and documented financial analysis to determine if there is an opportunity for either immediate relief from the entire levy or partial levy relief.  If a taxpayer substantiates that the levy creates economic hardship, then relief may be possible.

Sometimes clients under levy have not prepared all of their tax returns and as such, believe that there is no way to remove the levy until their tax returns are filed.  This simply is not true.  While it may or may not be possible to acquire full relief, an analysis of income and expenses utilizing IRS standards will allow for the taxpayer to obtain at least partial relief to pay for many expenses.  These expenses can include basic necessities such as food, clothing, medicines and health insurance premiums.  Payments for housing and utilities will be allowed up to a maximum amount based on county of residence and household size.  Additional expenses such as car payments and vehicle operational expenses, like gas and insurance, will also be allowed up to a standardized amount.

After seeking partial levy relief, it is then appropriate to file tax returns as soon as possible.  Once the taxpayer has filed all outstanding tax returns, the IRS then makes available a variety of options that are not available when a taxpayer has failed to file all returns.  At that point, the representative can assist the taxpayer with an analysis of their income, expenses and equity in assets to determine if the taxpayer is a good candidate for an installment agreement, a partial payment installment agreement, an Offer in Compromise (settlement), or currently not collectible status.  It is ALWAYS best to go through this analysis as there are opportunities to come into compliance with the tax laws, move yourself out from under the enforcement action, such as a wage levy, and still address the old tax debt.  Many would be surprised to learn that the IRS does work with taxpayers to resolve many issues in a way that isn’t nearly as traumatic as believed.

Obviously, the best case scenario is to take action before a levy is in place, however, once that occurs, there is always something that can be done to make the situation more bearable.  We encourage you to contact our firm if you have any questions or concerns about these matters.