CURING TAX DELINQUENCIES
IRS / FTB
- Do not ignore notices or letters from the IRS/FTB.
- Do not wait until you receive a notice of wage levy before you contact the I RS/FTB.
- Contact the IRS/FTB upon first notice indicating a liability is owed.
- If you cannot pay the liability off in full, request an arrangement for installment payments or make an offer in compromise (settlement offer for an amount you can afford as payment in full that is less than the amount owed).
- Be realistic! Do not agree to a repayment plan you cannot handle.
- Payments must be consistent; default can result in a wage levy. If for any reason you are going to be late, or you cannot make your payment, contact the IRS/FTB immediately.
- If you receive notice of levy, there is still time. The notice is to get your attention. Contact them right away.
- Failure to pay taxes may result in
- Bank Levy - IRS may attach up to 100% of funds held in the bank account.
- Wage Levy - may attach the majority of disposable earnings. (Request publication 1494 directly from the IRS for schedule of levy exemptions.)
- State tax delinquencies are a matter of public record, they will be reflected on your credit report, they prohibit sale of property, and notices of state tax liens continue in effect for 10 years--may be extended for up to 30 years.
- Keep copies of anything you send to the tax agencies and a notebook recording any and all communications with them during payment negotiations.
PAYMENT GUIDELINES, CONDITIONS, AND FEES
IRS: 4330 Watt Ave; problem resolution, 1-800-829-1040. www.irs.gov
- $25 minimum payment.
- Less than $10,000 owed must be paid within 30 months.
- More than $10,000 owed or payment arrangement requiring more than 36 months must be accompanied by a financial statement.
- Lien is filed when $10,000 or more is owed or the payment arrangement extends beyond 36 months.
- A set-up fee of $43 is required once the payment arrangement has been worked out (they also require a re-instatement fee of $24 any time a payment arrangement has been defaulted and needs to be started again). These fees must be paid in advance of the first payment
The IRS has several free booklets you can order to assist you with your taxes.
FTB: The Franchise Tax Board Sacramento Public Office is located at 3321 Power Inn
Road, Ste. 250, Sacramento, CA 95826, 1-800-852-5711. ftb.ca.gov
- Less than $500 owed must be paid within 10 months.
- $500-$5000 owed must be paid within 22 months.
- $5000 or more owed or a payment arrangement longer than 24 months must be accompanied by a financial statement.
- Lien is filed if $2500 or more is owed or the payment arrangement extends beyond 12 months.
- Collection fee of $103 is assessed each time there is a need for the collection process.
- Mandatory electronic funds transfer of payments for anyone who has a checking or savings account.
- Late or defaulted payments nullify the payment arrangement and account reverts back to the former state (e.g. if prior collection activity was at the wage garnishment stage, wages will be automatically garnished and auto-deducted from a checking or savings account).
OTHER INFORMATION NEEDED FOR BOTH AGENCIES: WHAT YOU PLAN TO DO TO CURE/PREVENT FUTURE LIABILITY
- All prior and current year tax returns must be filed, and future tax returns must be filed on time or the payment arrangement will be voided.
- W-4 must be changed to prevent underpayment of future taxes.
REMEMBER, IF THE TAX AGENCY AGREES TO ACCEPT PAYMENTS ON YOUR TAX LIABILITY AND YOU END UP OWING AGAIN THE FOLLOWING YEAR, THE PRIOR AGREEMENT BECOMES NULL AND VOID, AND ALL TAXES ARE DUE IN FULL.
Taxpayer advocates
The taxpayer Advocate Service is an Internal Revenue Service program that helps taxpayers who have been unable to resolve federal tax problems through normal IRS channels.
There are 74 taxpayer advocates including five in California. Sacramento's office has jurisdiction over 30 Northern California counties.
The TAX reports directly to Congress and, therefore, is inderpendent of the IRS hierarchy. Because it is an arm of th eIRS, it has necessary access to taxpayer records.
California's Franchise Tax Board has a similiar program.
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