3/30/2017 Let’s Talk Levies Presented by Jassen Bowman,EA Texas Board of Accountancy Sponsor ID: 010319 This webinar may not be eligible for CPA CPE credit in the following states: IL, NJ, NY, PR . State boards of accountancy have final authority regarding the applicability of any particular course to your CPE requirements. Please check with your state board regarding IRS Program Number: SDQJW-T-00036-16-O requirements and acceptance. Shameless Plu lug Please Tell Your EA & CPA Colleagues About These Webinars FreeTaxCPE.com 1
3/30/2017 Before We Get Started… • To receive CPE credit: • Stay logged in for the full hour. • Answer all three polling questions. • Your Certificate of Completion will be emailed within 72 hours. • Acronyms: Don’t hesitate to ask what they mean. • Slides: Download PDF via “Handouts” pane in GoToWebinar panel. • Questions: Feel free to ask questions during the presentation using the GoToWebinar control panel. Course Objectives • Understand the role of levies in the IRS collection process. • Define what is subject to levy and what is safe from levy. • Understand the most common basis for IMF and BMF levy releases. • Apply the Collection Appeals Program to help your clients. 2
3/30/2017 The Statutory Origin of Liens “If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person .” 26 U.S. Code § 6321 The Statutory Origin of Liens “ Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time .” 26 U.S. Code § 6322 3
3/30/2017 Statutory Authority For Levies “If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax…” 26 U.S. Code § 6331(a) What Can Be Levied? • Almost everything… • Federal payments (including Social Security) • Wages • Accounts receivable • Yes, they will contact a business’ customers • Bank accounts • Special 21-day rule • Retirement accounts • …and sometimes we ask the IRS to levy these(!) • Brokerage accounts • Cash value of life insurance • Real property • Personal property • Money and property held by others that belongs to the taxpayer • Personal liability 4
3/30/2017 Production of Books • Section 6333 compels 3 rd parties to produce records containing evidence of property or rights to property to the service. • IRS financial summons to banks, customers, employers, etc. What’s safe from levy? • Section 6334 specifically exempts from levy… • Clothing and textbooks ( yes, that’s in the statute ) • Food, fuel, furniture, guns, livestock, and poultry up to $6,250 • Tools of the trade and reference books up to $3,125 • Unemployment benefits • Worker’s compensation benefits • VA benefits for service-connected disabilities • Welfare payments derived from a means test or disability (SSI, TANF, etc) • Undelivered mail • Railroad pensions and annuities & Medal of Honor recipient pensions • Wages subject to court ordered child support payments • Wages equivalent to the standard deduction and personal exemptions, pro rated weekly 5
3/30/2017 Can they take my client’s house? • Vacation homes and rental properties are subject to normal administrative seizure processes, but requires “district director” approval ( except jeopardy cases ). • District Directors eliminated with RaRA98, so this now falls to territory managers and Area Directors. • IRC 6334(e)(1)(A) requires an order from a US District Court judge ( not tax court) in order to proceed with the levy of a primary residence. The Levy Process • Assessment always required first • Then comes a bill (notice & demand), such as CP-501 • Service only required to wait 10 days, but usually gives 30 • Then comes Notice of Intent to Levy, CP-504 • 30 days • This is the notice actually required under Section 6331(d) • Then comes Final Notice of Intent to Levy, Letter 1058 (LT-11) • Final is NOT required by law, it’s an administrative courtesy • 30 days 6
3/30/2017 Representation Tips • When an RO picks up a case from ACS, they are required to check if notice requirements have been met. • They will usually issue a Letter 1058 immediately, along with 9297, if ACS did not previously issue an LT11. • When reviewing transcripts, look for the LT11 or TC 971 code from ACS ( left column of transcript ). If not present and RO tries to immediately levy without issuing Letter 1058, then statutory requirements have not been met and levy is invalid. • RO’s are instructed to use discretion when issuing Letter 1058 on IMF -only bal due cases (IRM 5.11.1.3.3). Contact GM immediately if taxpayer history isn’t egregious and RO is moving rapidly to levy. Levy Releases • IRC 6343 requires levy release when – • Tax debt is paid in full • CSED lapses • Levy release will facilitate collection • Taxpayer enters into installment agreement • Levy is creating an economic hardship • FMV of levied property > tax debt and release would not hinder collection • Wage levies released when CNC determination made 7
3/30/2017 Levy Releases • Expedited levy release required on tangible business property when levy prevents carrying on the trade or business. IMF Levy Releases Three most common methods of obtaining release: 1. Demonstrate economic hardship 2. Enter an Installment Agreement 3. Enter CNC 8
3/30/2017 Economic Hardship • Taxpayer must make FULL & accurate financial disclosure, even if otherwise eligible for streamline criteria • Levy action must be causing or will cause taxpayer to be unable to meet basic living expenses • Taxpayer has a right to relief only to the extent to not cause hardship. • Partial releases of wage levies are common for middle and upper income taxpayers. • Remember that tuition, tithing, vacation home mortgage, RV, and other payments are NOT “basic living expenses” . • Refer to Collection Financial Standards for allowable living expenses Most Common Scenario • Taxpayer suddenly decides to address the situation the moment a bank account or wage levy hits. • Expects you to work a miracle immediately. • Simply file a CAP and go economic hardship, IA, or CNC route. • Must, must, must provide full 433-A and supporting documentation at or prior to RO/GM conference. • Explain to client that this is not optional. • If they refuse, withdraw your CAP and fire the client. 9
3/30/2017 BMF Levy Releases • BMF levy releases generally need to be tied to either 3 rd party harm or facilitating collection • Two key questions to ask… • Is the levy action disrupting business operations such that the business will not be able to continue operating? • Will the business be unable to pay employees? BMF Levy Releases • Example…. • Business is otherwise fine, but IRS levy on payroll account will cause employee paychecks to bounce, causing economic hardship for employees. 10
3/30/2017 BMF Levy Releases • Example…. • Business is otherwise viable, but accounts receivable levy against company’s single largest customer is destroying the business relationship, causing customer to look elsewhere for the product/service. Losing this one customer will put the taxpayer out of business immediately, and IRS will never see a dime. BMF Levy Releases • If a jeopardy determination has already been made, or the Service has already determined that the business is not viable, then levy release on facilitation of collection grounds is unlikely. • May need to start looking at business sale or shutdown/liquidation options. • Third party harm is still viable. 11
3/30/2017 Collection Appeals Program • Streamlined, fast track Appeals process • GM conference required within 2 business days • Typically filed on levy action • CAP decisions by Appeals are binding on the taxpayers and Collections . • Form 9423 Collection Appeals Program • By taxpayer, or a third party whose property is subject to a collection action • Levy or seizure action that was or will be taken. • Notice of Federal Tax Lien • Filing of a Notice of Federal Tax Lien against an alter-ego property. • Denials to issue lien certificates; such as subordination, withdrawal, discharge or non-attachment. • Rejected, proposed for termination or terminated installment agreements. • Disallowance of taxpayer's request to return levied property • CAP decisions by Appeals are binding on the taxpayers and the Collection functions. 12
3/30/2017 Collection Appeals Program IRM Fun Times • IRM 5.1.9, Collection Appeal Rights • IRM 5.11.1, Pre-Levy Actions, Restrictions on Levy, Post-Levy Actions 13
3/30/2017 Shameless Plu lug Please Tell Your Colleagues About These Webinars FreeTaxCPE.com 14
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