Former Veteran IRS Agent’s: Guide to a Fresh Start from Tax Levies and Back Tax Debt Strategies

Former Veteran IRS Agent’s: Guide to a Fresh Start from Tax Levies and Back Tax Debt Strategies


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Will Answer the Following Questions:

  1. How Long Can The IRS Collect On Back Taxes?
  2. How Long Can The IRS Put A Levy On My Bank Accounts or Wages?
  3. How Long Is An IRS Federal Tax Lien Good For?
  4. How can I get my Federal Tax Lien Released?


So you owe IRS money on back taxes. You get a final notice of Intent to Levy from the IRS. You must become proactive. Do nothing and you will get slaughtered? What is the next step?

Most taxpayers do nothing. They freeze because they do not know what to do. They know this day has been coming. Fear now strikes. The IRS is ready to have a field day at your expense.

If you do not respond to IRS Notices especially the Final Notice of Intent to Levy, the IRS Collection Computer called C.A.D.E. will automatically send out notices to your banks and/or your jobs.

It searches all the levy source the IRS CADE computer has stored over the years under your social security number. Most taxpayers think IRS dragnets the local banks until it finds your jackpot of funds that is not true.

As a matter of fact you give the IRS your levy source, that is right, you!

IRS has been collecting income information on you for the last 7 years. It stores the information from checks you have written them, from 1099 sources as well as W-2 sources. It keeps all your asset information and also third parties that have reported income information on you.

When there comes a time that you forget to pay your favorite Uncle, the IRS CADE computer gets excited and does it thing. It starts to spit out tax levies and garnishment everywhere there is a possible money source found on the CADE computer.

Being a Former Veteran IRS Agent of 10 years and also being a teaching instructor at the Regional training facility I thought you would appreciate some honest insight on frequently asked questions.


First FAQ – How long can the IRS collect back taxes?

IRS has 10 years to collect back taxes. That period of time runs from the date of assessment. The date of assessment starts from the day IRS processes your tax return. An example of this would be:

You file your tax return on April, 15 and send or e-file your tax return into the IRS. IRS usually takes 6 weeks to process your tax return. The day IRS posts your tax return on their computer system is the date of your assessment. There are circumstances that extend the statute of limitations. Rather than get into all the detail of every possible reason, let me give you a couple of the basic and most common circumstance that the extension of the statute is granted:

  1. The taxpayer signs waiver form 900. The extension date is found on the top of this form. Never sign the form 900. Check with a tax professional if you are being forced into doing this.
  2. The filing of a bankruptcy. The statute extends for the time it was in bankruptcy plus 6 months.
  3. Litigation date. If you have entered in to litigation with the IRS the statue is extended for the time the case was in the court system.
  4. The filing of a Collection Due Process.
  5. The filing of an Offer in Compromise


While there are other exceptions, the situations listed above are the most common. You should always call a tax professional in case you are not sure.

Taxpayers can pull free IRS transcripts to check out their actually date of assessments.


NOTE: Be aware: Do not file a tax return if the 10 year period has not started to run.


Second FAQ – How long can the IRS put a levy on my bank accounts or wages for?

This may surprise you but IRS does not like to levy your bank or your wages. IRS levies because the taxpayer does not contact the IRS to resolve their tax bill. IRS can levy continually and will continuously levy or garnish until the taxpayer contacts the IRS to resolve their bill.


The Bank Levy


When the IRS sends a levy to your bank the funds are not immediately removed. The funds are frozen at the time and date the bank actually receives the levy. The funds are frozen for 21 days so during this period you have the opportunity to call IRS and get the levy released. Monies deposited in your bank account after the bank froze your account are not part of the levy and belong to you.


The Wage Levy or Garnishment


When IRS garnishes your wages that is a different story. That levy or garnishment is continuous. It does not stop until you call IRS, file all your tax returns and work out a tax settlement on how your case will resolve itself with the IRS.

The three most common ways the IRS will close out your case when you call the IRS will be with a part payment agreement, a taxpayer hardship or the filing of an offer in compromise. There are 52,000 offers in compromise filed each year of which 12,000 are accepted and over 25 million payment agreements.
With all IRS collection notices will require a detailed financial statement with documentation to release your wage or bank levy. IRS will want all tax returns filed and up to date.


Third FAQ – What is a Federal Tax Lien and how long is a Federal Tax Lien good for?
First of all, a federal tax lien gives the IRS a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after the IRS does all of the following:


  1. The IRS assesses the tax liability;
  2. IRS sends you a Notice and Demand for Payment – a bill that tells you how much you owe in taxes; and
  3. You neglect or refuse to fully pay the debt within 10 days after the IRS notifies you about the filing.

Once these requirements are met, a federal lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that the IRS has a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.

The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).
Big Caution Here

Once a federal tax lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before the federal lien filing becomes necessary.


How long is the Federal Tax Lien good For?


The Federal Tax Lien is good for 10 years from the date of assessment. The Federal Tax Lien can be extended by the reasons stated in the statue of limitations section. If you look on a Federal tax lien the date of assessment can be found.


There are three general ways to get your Federal Tax Lien released:

  1. Pay the liability in full. IRS will give you an immediate release if requested or the IRS will release the lien within 30 days after full payment. Make sure to check your credit report 30 days after the lien has been paid off to make sure the IRS has indeed released the federal tax lien. If not, call our offices and we can get the federal tax lien released.
  2. Let the statute of limitation expire. After the usual 10 years, the federal tax lien releases by statute. You have to do nothing. Federal tax liens self release. If a creditor wants a hard copy you will have to call the IRS and request a hard copy. This usually takes 10 days.
  3. Post a surety post bond. These usually occur in business situations.

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*Mr. Sullivan has been in private practice since 1982 in South Florida which gave roots to Fresh Start Tax LLC.
The firm began as Sullivan & Powell PA and through the years transitioned to its now current form.

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