NYS & IRA Tax FAQs
Frequently Asked Questions
People confuse these two all the time. Both are “tools” in the government’s “tool box” for collecting unpaid back tax debts: a levy is when the government, whether the IRS, or a state taxing authority, like New York state’s Department of Taxation and Finance (“DTF”), sometimes called “New York’s IRS” uses its enormous power and discretion to seize money or other assets to collect on a debt.
For example, when it freezes a bank account and then seizes the funds in it, or when it the IRS or agency orders an employer to seize (or garnish) an employee’s wages and send the money to it, the IRS, rather than pay the employee. So levying is one of the most powerful tools in the IRS’s or DTF’s tool box, and is one of the thing which makes the IRS so feared and, sometimes, hated.
A lien is a declaration that a debt exists, and can establish the priority among creditors as to which creditor gets paid first when there a re several creditors trying to collect on a debt and is crucial where there are more claims than there is money or assets to pay.
The IRS is sending me threatening letters, can’t I just call them up and make some kind of deal? Can’t I just do it myself – why hire someone to deal with them for me?
You can try to make a deal on your own, and you might do ok, BUT, no matter how nice, pleasant, or cordial a person from the IRS might sound when you talk on the phone, the IRS person’s mission is to collect as much money as possible as quickly as possible.
They do not necessarily advise a taxpayer that the taxpayer has certain rights when dealing with the IRS, taxpayers have, when representing themselves, waived rights they did not even know they had (like, sometimes the right to a hearing where they can propose less onerous alternative resolutions than whatever the IRS is planning to do (like levy a bank account).
OK, so if I am hiring a tax professional, why hire a lawyer? Isn’t tax stuff what accountants do? Shouldn’t I hire an accountant, not a lawyer?
A lot of accountants and enrolled agents have not learned and don’t know how to deal with the controversy portion of tax matters.
While resolving the problems which has led to the taxpayer being in controversy with the IRS (or other taxing authority, like NY State) Their focus is on tax return preparation, audited financials, and profit and loss statements, not on representing taxpayers about to have their bank account or paycheck levied for nonpayment of tax.
Also, as an attorney admitted to the United States Tax Court, if your case needs to go to Tax Court, I can represent you there. Most accountants cannot.
Will the IRS look at me more suspiciously and think I have something to hide if I hire a lawyer to represent me? Put another way, will it look bad if I “lawyer up?”
Short answer: No. Longer answer: Frequently, IRS people are relieved when a taxpayer hires a tax professional to represent them. Why? Because it is often easier to get a problem solved with a tax professional.
A good tax professional is more familiar with the rules and procedures, and so, what is reasonable and possible in the complicated world of tax problem resolution.
Also, IRS people also appreciate dealing with tax professionals representing taxpayers rather than the taxpayers themselves because it is less likely that the IRS person will have to contend with the personal on the other end of the phone having explosions of anger or bouts of weeping when discussing the taxpayer’s situation and trying to negotiate a solution.
That depends on how much you owe, what resolution you are trying for, and how much information the IRS wants to see. Some situations can be handled in a few weeks, others can take months, and sometimes longer, particularly where more than $100,000 is involved and the taxpayer is proposing an offer in compromise.
The short answer is probably not. The longer answer is that the IRS (and NY State’s DTF) deal with nonpayment and nonfiling issues mostly as civil rather than criminal matters. For the most part unless you are a tax protester or creating and filing fraudulent returns, you are probably going to be on the civil side or the IRS and you’ll stay there.
That said, the taxing authorities do sometimes seek criminal prosecutions relating to taxes. Famous examples are Hollywood movie star Wesley Snipes, who not only did not pay taxes or file tax returns for several years, but made long-discredited arguments about the supposed unconstitutionality of federal income tax, and art gallery mogul, Mary Boone, who improperly and fraudulently claimed personal expenses, like renovating a residential apartment, as business expenses. Read an article I wrote on Mary Boone here.
My fee is based on what services are needed. Frequently, we work on a flat fee basis. I will only offer services if you actually need them. I want to help you get your issue addressed and resolved in the most efficient and economical way.
If you owe the IRS money, your refund will be held back and applied to reduce the balance due. If your refund is larger than the amount owed, that part of your refund which will bring the balance due down to zero will be applied to the balance due and the IRS will send you the difference.