Case Study: IRS Wants to Levy My Wages
Case Summary: IRS Currently Uncollectible Status
Client Location: Georgia
Client Age: 50’s
Total Tax Debt with IRS: $80,0000
Case Details: Client’s employer had received a wage levy notice from the IRS. Client was afraid that once the levy was implemented he wouldn’t be able to pay his child support payments.
Case: Resolution: IRS Levy removed
IRS is About to Levy My Wages! I Won’t Be Able to Pay My Child Support!
Hi, I’m Jeff Fouts, a tax attorney located in metro Atlanta, with a nationwide law practice helping clients who have serious IRS problems. I’d like to talk about another client case study.
- A required unfiled tax return had to be prepared and filed.
- Estimated taxes needed to be calculated and currents payments began.
- We were able to convince the IRS to release the wage levy.
Synopsis of the Case:
A man in his early 50’s from Ellijay, Georgia stopped by our office to see if we could help him prevent the IRS from levying his wages. If his employer levied his wages, this man said he’d be unable to pay his court-ordered child support payments and that Georgia would hold held him in contempt and put him in jail.
Our first step was to obtain a signed IRS Form 2848 and Form 8821 that allow us to represent him before the Internal Revenue Service.
This also allowed us to gather other information about his case from the IRS when we called them to get his Account Transcripts which would show us several important pieces of information.
We also had to be sure Client had filed all his required tax returns. His account transcripts showed his total liability to be close to $80,000 for tax years back to 2002. We could also see that the IRS had not received one of his recent tax returns. Our client had worked for over ten years as a contractor and had not had taxes withheld from his pay. Our client was not familiar with the IRS requirement that taxpayers make estimated tax payments.
We were able to tell our client that we were going to try to do our best to prevent the levy from actually taking his money, and preventing his child support from being paid. One piece of good news is that according to the U.S. tax Code and IRS Regulations, the IRS is supposed to allow court-ordered child support payments to be deducted from income before an IRS levy starts taking money out that income payment. The IRS Code is very clear on this point if the person is receiving W2 income, but the problem is that the tax Code isn’t as clear when the income being levied is some type of income different from W2 income, such as 1099 payments.
Due to the requirement that an employer’s failure to comply with an IRS levy action can result in the employer becoming liable for the delinquent taxpayer’s unpaid tax debt, so its very important they take out the right amount but not too much and not too little. Our client’s employer was understandably worried about how to comply with the IRS levy order since there was this anbiguity about how different kinds income should be handled in regard to child support payments.
We requested that our client prepare and file his unfiled tax return as soon as possible which he did. This removed a big hurdle to dealing with the IRS, who would have demanded that certain tax returns be filed before looking at our client’s collection options.
We also requested that the client begin making monthly estimated tax payments to show the IRS that he now understood how to pay his taxes on time and in the right amount.
We were able to convince the IRS to release the levy on our client’s wages.
Next, we collected and analyzed his financial information. We also had our client file his current year tax return. He continued making his monthly estimated tax payments. Our client’s financial situation showed he did not have any available income to make payments to the IRS so we were able to have his tax debt placed in what is called “currently not collectible status” which is a kind of hardship status. This is a temporary status that continues until the taxpayer’s income increases. The IRS tracked whether his income goes up by looking at his future tax filings.
What’s the moral of this story? That IRS wage levies and bank levies are very serious collection actions and they can take not only your money, but your peace of mind as well. Your goal should be to deal with IRS levies as quickly as possible.
I hope this important client case study has helped you understand the IRS a little better and how tax problems are solved. Chances are you have questions or concerns about your own particular tax problem. I encourage you to pick up the phone and call me. I can answer your questions. Over the past 20 years I’ve represented clients in all 50 states and 29 foreign countries, and I welcome your call. You can reach me at 1-888-995-6785 or by email at firstname.lastname@example.org. I’m Jeff Fouts and thanks so much for watching. Have a wonderful day.