Are you concerned about a tax lien on your property? Are you worried the IRS is going to seize your assets? How can you protect your assets from the IRS? Are you at risk?
Assets and property that can be seized by the IRS to satisfy a tax debt include wages, retirement accounts, certain benefits (Social Security, for example), and properties you own, such as boats, vehicles, commercial and business properties, and houses.
The IRS (Internal Revenue Service) will not seize your assets without warning or valid reason, so if you can resolve your tax problems now, you can prevent things from getting out of hand.
You might need help with estate planning to avoid certain estate and gift taxes. If things are truly out of control, a tax attorney or Tax Professional (CPA or EA), might need to look over your state and federal taxes.
Look at all possibilities before throwing in the towel! After all, you are better off making a partial payment or speaking to the IRS about your financial situation than you are not contacting them or making any payment on your own. It’s always best to be upfront and honest with the government to protect your assets!
How to Protect Your Assets from the IRS
1. Pay your taxes on time.
To prevent any issues with the IRS, you should aim to file and pay your taxes when they are due. If you are unable to meet the IRS deadlines, be sure to file a tax extension. This will give you additional time to file your income tax return and any other tax returns you need to file.
2. Make tax payments in full.
Along with filing your taxes when they are due, you should make sure payment is made when the deadline requires it. If you are unable to make payments on time, speak with the IRS about payment options. They will work with you, as they would rather you pay a little or partial payments than none whatsoever.
If you are unsure what your tax liability is, you can make estimated payments with the help of a qualified tax consultant. Usually, tax liability for small businesses and entrepreneurs is 30% of your income, if you want to be generous about estimating it.
3. Reduce your tax liability.
To prevent an unexpected tax bill, try to reduce the amount you will need to pay the IRS. You can do this by using tax benefits, such as tax deductions and tax credits.
Tax deductions reduce the amount of taxable income you will need to pay taxes on; tax credits reduce your tax bill dollar for dollar. Tax credits are generally preferred, regardless of your financial situation, but you should only use the tax benefits you qualify for.
If you only qualify for tax deductions, don’t try to take tax credits to receive a more favorable tax result. This will only put you in hot water with the IRS, because your tax return will have errors on it; these tax errors will need to be remedied, which could cause further tax problems in the future.
4. Come to a tax payment agreement with the IRS.
As mentioned, the IRS will work with you to receive the payments you owe if you speak to them about your financial concerns.
One thing you can do is an installment agreement with the IRS. With an installment agreement, you make monthly payments to pay off your tax debt over time.
Another option is a partial payment installment agreement. With this agreement, you pay what you can afford on a monthly basis. Of course, you will have to qualify for the option you take.
An offer in compromise applies when the IRS allows you to pay off your tax debt for less than what you currently owe. There are strict financial criteria you must meet to qualify for this, though. All other options are exhausted first in the majority of cases.
The currently not collectible (CNC) status applies when you can prove to the IRS that you are facing a serious financial hardship and are unable to pay anything. In this case, you are likely to not even be able to afford regular living expenses. If you receive CNC status, the IRS cannot take your paycheck or property in lieu of a tax payment.
5. Enlist the help of a tax professional.
While you might think that working with a tax professional is not necessary, you might not understand what all tax experts are able to do today. They know tax laws and usually offer individuals and businesses a free consultation initially anyway.
Working with a tax consultant can be very beneficial. They understand the laws, rules, regulations, requirements, and all the tax jargon they have learned from their education, expertise, and experience.
Depending on the type of tax professional who you decide to work with, they can represent you in dealing with the IRS. If you suspect a tax audit is in your future or are just concerned about being audited, work with the right tax expert – someone who can represent you with the IRS, such as an enrolled agent.
One great thing about working with a qualified tax representative is that they are required to stay up-to-date with the latest tax codes, statutes of limitations, and tax laws each year. Make sure that you find the right one to ensure your taxes are handled by a pro!
If you are concerned about protecting your assets from the IRS, it’s best to have a tax consultation with a qualified tax expert.
To learn more about the IRS collection methods, be sure to read IRS Publication 594: The IRS collection Process. This publication discusses the entire collection process – from your first tax bill to the seizing of assets.
At Borshoff Consulting, we are happy to assist you with any tax issues you may have. Book a free consultation today! You can trust Indiana’s tax expert to help you file your tax return the correct way! What are you waiting for?