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IRS CAN SUSPEND YOUR CASE IF YOU QUALIFY.

In the midst of today’s challenging economic climate, many individuals are struggling to keep up with their finances. The Internal Revenue Service (IRS) may not publicize this information, but it is indeed conceivable that you may be eligible for an economic tax hardship. The IRS guide outlines specific guidelines that permit taxpayers experiencing financial hardship to apply for this tax hardship. With this economic tax hardship, the IRS will place your case in a non-collectible file, relieving you of tax collection responsibilities.

The Process

To start, provide an updated financial statement (form 433-F or 433-A) to the IRS, as required by the department handling the case.

IRS needs documentation and current tax returns confirmation for this financial statement.

To avoid issues with the IRS, keep up with timely payments by adjusting your withholding and staying in contact.

If the IRS assesses that your situation qualifies as a current hardship, they will place you into the status of “currently noncollectable.” This means that your case will be suspended for the subsequent two or three years until there is a change in your ability to pay the IRS, as reflected in your adjusted gross income (AGI).

Should the CADE 2 computers of the IRS detect an adequate increase in your AGI, your case will be sent back into the billing cycle, reintegrating it into the system once more.

CANNOT PAY THE IRS – THERE ARE OPTIONS – tax professionalS

SUMMARY OF ECONOMIC HARDSHIP

When the full liability of the taxpayer can be collected, but the collection of the federal tax would result in an economic hardship, the IRS will evaluate all relevant facts before initiating collection or enforcement actions such as federal tax liens or federal tax levies.

Economic hardship is defined according to Treasury Regulations § 301.6343-1 and occurs when a taxpayer is incapable of meeting reasonable basic living expenses.

The Internal Revenue Service will determine what constitutes a reasonable amount for basic living expenses, and this determination will vary, taking into account the unique circumstances of each individual taxpayer.

Department of Labor Platforms

In collaboration with the United States Department of Labor, the IRS has established platforms to ascertain these hardship and living standards. These can be accessed on our website.

These guidelines are also utilized by the United States Department of Justice during standard U.S. bankruptcy proceedings. Since economic hardship is characterized as the inability to cover reasonable basic living expenses, it is applicable solely to individuals, including those operating as sole proprietorship entities.

Compromise on economic hardship grounds is not available to corporations, partnerships, or other non-individual entities.

To determine if the taxpayer qualifies for an economic hardship, the Agent carefully examines the taxpayer’s financial information and special circumstances, ensuring that all documentation is thoroughly recorded in writing.

The financial analysis involves a comprehensive review of basic living expenses, along with other relevant factors. The IRS may delve into the past three years, examining canceled checks and conducting a thorough asset check.

Credit reports, loan applications, and asset sales from the last three years may also be scrutinized by the IRS.

Moreover, the IRS may investigate if the taxpayer has moved assets beyond their reach.

Besides basic living expenses, various other factors influence the taxpayer’s financial situation, including age, employment status, dependents’ number, age, and health, as well as the cost of living in the taxpayer’s area of residence.

Extraordinary circumstances, such as special education expenses or natural disasters, as well as medical situations affecting the taxpayer or their family, are also taken into consideration.

Furthermore, the taxpayer’s education background can sometimes be a contributing factor in the determination of economic hardship.

This list is not exhaustive, and additional factors may be considered during the economic hardship assessment.

Other Factors

Other factors that support an economic hardship determination may include:

  1.  The taxpayer is incapable of earning a living because of a long term illness, medical condition or disability, and it is reasonably foreseeable that the financial resources will be exhausted providing for care and support during the course of the condition.
  2. The taxpayer may have a set monthly income and no other means of support and the income is exhausted each month in providing for the care of dependents.
  3. The taxpayer has assets, but is unable to borrow against the equity in those assets, and liquidation to pay the outstanding tax liabilities would render the taxpayer unable to meet basic living expenses.
  4. Someone in the immediate family of the taxpayer has been hit with a catastrophe.

An act of God causing an unforeseen occurrence.

Remember, each situation is different and each and every case is based on its own merit. No two cases are ever the same.

Economic Hardship – IRS will release Levies

The Service will release a tax levy if it determines that the levy is imposing an economic hardship on the individual, meaning the levy would prevent them from paying their essential living expenses.

To obtain a levy release based on economic hardship, the taxpayer must demonstrate good faith in their actions.

Examples of actions that may be considered as failing to act in good faith include, but are not limited to:

  1. Not fully disclosing all assets.
  2. Inflating actual expenses or costs.
  3. Providing false financial information.

The decision to release a levy due to economic hardship involves a thorough financial analysis. Sufficient financial information is required to confirm that the levy is indeed causing the taxpayer to be unable to meet their necessary living expenses.

Call us today and hear all the options you have in resolving your case

Did you know the IRS Wage Garnishment has a Continuous Effect of Levy on Salary and Wages?

A wage and salary levy differs from other IRS levies in that it has a continuous impact on the taxpayer. It stays in place until it is lifted and applies to all future payments. This includes any form of compensation like fees, bonuses, commissions, and related earnings.

All other types of levies only impact property or rights to property that are present at the time when the levy is initiated.

Examples:

When a bank account is subjected to levy, it can only seize the money that is present in the account at the time the levy is implemented. It cannot access any money that is deposited after that point.

However, in the case of other income levies, it can seize any payment that the taxpayer is entitled to, provided that the payment is fixed and determinable. If the payment does not depend on the performance of future services, the levy can also include any future payments that the taxpayer is entitled to receive.

Retirement Income.

To seize an author’s royalties, a Form 668-A is given, which pertains specifically to royalties that are fixed and determinable for books that have already been published.

The levy targets royalties for future book sales, but not those for books that aren’t yet written and published. A new levy is mandatory to seize royalties for those upcoming books.

Another Example:

A Form 668-W is utilized to impose a levy on a taxpayer’s retirement income. Since the taxpayer has an unchangeable right to future payments, the levy continues in force until it is released.

Exclusions from the IRS Wage Garnishment

A portion of the individual taxpayer’s earnings, such as wages, salary (inclusive of fees, bonuses, commissions, and alike), other income, as well as retirement and benefit proceeds, is shielded from the levy.

The weekly amount that is protected is:

The sum of the taxpayer’s standard deduction combined with the amount that can be deducted for exemptions on the income tax return for the year in which the levy is executed.

Immediately Release, Remove IRS Wage Garnishment

Then, this total is divided by 52.

If the income is not paid on a weekly basis, it will be prorated, ensuring the same exempt amount. Additionally, any sum required by the taxpayer to meet court-ordered child support obligations is exempted. Please take into consideration:

The support order may be derived from either a court or an administrative procedure, as governed by the laws and protocols of a state, territory, or possession.

If support is permitted, the same child cannot be utilized as an exemption when determining the exempt amount. For reference, see IRM 5.11.5.4 (2)a above.

The IRS will not lift any Wage Levy until all necessary tax returns have been submitted.

If you lack the required records, we can obtain all your information from the IRS to prepare for all previous years. Brian Dreis, a tax professional, can facilitate this process within just a few days.

IRS allows you some money during the garnishment phase.

The IRS may send a Wage Levy or wage garnishment to your employer, but there are some exemptions that the IRS allows you to keep.

Your employer will receive a chart from the IRS to help determine the amount you can keep from your paycheck. This amount is meant to cover basic living expenses only. For instance, in 2009, a single taxpayer with one exemption was allowed to keep $179.81 per week, and the IRS was authorized to take the remainder of the money.

Why did the IRS place a Wage Levy on me?

The IRS has issued a Wage Levy or wage garnishment because the taxpayer failed to reply to letters from the IRS. By law, the IRS must make several attempts to reach a taxpayer who owes taxes.

Some taxpayers may not get this information due to relocation or failure to receive the mail sent by the IRS. Regardless, once an IRS Notice of Levy has been sent, it will not be removed until communication has been established with the Internal Revenue Service. Dreis Tax Services, a tax professional, can manage the IRS dealings on your behalf.

Dreis Tax Services, tax professional will

  • Obtain a copy of your full tax history transcript;
  • Submit a power of attorney to the IRS, so you don’t have to directly communicate with them;
  • Achieve the removal or release of the Federal Tax Levy;
  • Conclude your case and resolve your outstanding tax issues.

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