If you money to the IRS, you have taxpayer rights.
Your rights are in the the Internal Revenue Code, which has laws that limit the power of the IRS collection division to collect, levy and destroy.
An IRS collection agent cannot always do what he wants, when he wants.
These laws protect you from the collection enforcement powers of the IRS.
If you are facing an IRS Revenue Officer or an Automated Collection Service representative, IRS collection laws that are on your side can be golden.
For when you need it, here are the most important collection laws and rights in the Internal Revenue Code:
IRS must give you notice before levy and the right to appeal, Internal Revenue Code 6330 and 6331(d):
The IRS must send you a letter before they can take your property, and give you 30 day notice beforehand. This letter is called a Final Notice of Intent to Levy. After you receive a Final Notice, tax laws give you 30 days to file an appeal to dispute the IRS levy, stop it from happening, have a hearing with an IRS appeals officer to reach an alternative solution to levying, and, ultimately if all else fails, petition the US Tax Court for additional review. This is called a collection due process appeal – and all IRS enforcement is on hold while you exercise your rights to appeal.
IRS cannot levy or seize your property unless it results in a recovery of money to them, Internal Revenue Code 6331(f) and 6331(j)(2)(c):
This is known as the no equity rule. In other words, the IRS can only seize your property if it results in payment to them. For example, if you have a F150 truck that is worth $5,000 and has a $5,000 loan on it, an IRS seizure will only get your bank paid on the loan. There will be nothing left for the IRS as there is no equity in it for them. Because of that, they legally cannot seize it. Same is true for your house. The no equity law eliminates the vast majority of IRS seizures.
The IRS has 10 years to collect your unpaid tax debt, Internal Revenue Code 6502:
The good news is that Internal Revenue Code 6502 gives the IRS 10 years to collect tax debts. After 10 years expires, the IRS must, by law, put a credit on your account for the amount that cannot be collected, and move your account balance to zero. The time to collect begins when the IRS first puts a balance due on its books, and ends 10 years later. The end is known as the IRS collection statute expiration date. By law, owing the IRS is not forever.
It is unlikely that the IRS is going to take your personal belongings, household goods, furniture, and clothing, Internal Revenue Code 6334(a):
The Internal Revenue Code 6334 prevents the IRS from taking your everyday personal belongings. In other words, you have the right to keep your essentials – the IRS cannot put you out on the street with no clothes, furniture, or household goods. Like the no equity rule, this is another protection allowing you to keep your property and protect it from the IRS.
The IRS is required by law to consider settling your debt, Internal Revenue Code 7502:
You have heard it on the ubiquitous television and radio ads – settle your tax debts for pennies on the dollar. The truth behind the ads is in Internal Revenue Code 7502, Compromise. Yes, by law, the IRS is authorized to settle your tax debt for less than what you owe, known as an offer in compromise. But be careful – not everyone qualifies for an offer in compromise. However, the IRS has very rigid guidelines on examining an offer in compromise. The IRS will look at your household income, living expenses and asset values, and determine if they can collect the amount owed from you. In most cases, to accept a compromise, the IRS has to be convinced that they will never collect the full amount owed from you. If so, then they can agree to settle for a lower amount, representing what can be paid and recovered.
You can enter into a payment plan with the IRS even though it will not pay them back, Internal Revenue Code 6159(a):
If you would like to make payment arrangements with the IRS, the law does not require you to pay them in full. Partial payment installment agreements are okay, permitting you to pay the IRS only what you can afford. Remember that after 10 years your IRS debt can be unenforceable from expiration of the statute of limitations on collection – this time is running while you are making your monthly installment payments.
The IRS does not just show up one day and take your house. The law makes it harder than that, Internal Revenue Code 6334(e):
The IRS cannot take a personal residence on their own. They need to file a foreclosure lawsuit first. And that lawsuit must be approved by an independent District Court judge, who must agree to the sale. This judicial process of court approval prevents surprises, and provides avenues of defense before the IRS can take a house. Keep in mind, however, that seizing a house a extremely low on the IRS enforcement priorities – over the entire country, they seizure about 500 pieces of real and personal property a year – out of millions of taxpayers that owe them money. Also, once you are in a payment plan or in economic hardship, the IRS continues to be prevented from levying you.
The IRS required to release levies if you enter into a payment plan, or if it is causing an economic hardship, Internal Revenue Code 6343:
The Internal Revenue Code protects you against ongoing and continuous IRS levies, and can require their immediate release. First, if you can enter into a payment plan on your taxes, the IRS is required to release any pending levies against your wages or accounts. And it’s okay if you cannot afford to make monthly payments. If it can be demonstrated to the IRS that the levy is causing an economic hardship and preventing you from paying necessary living expenses (rent, utilities, car payment, medical bills) for you and your family, Internal Revenue Code 6343(a)(1)(D) requires the IRS to release the levy to alleviate the hardship it is causing you.
Most IRS decisions are not final and are subject to administrative appeal and review by an independent IRS settlement officer:
For example, Internal Revenue Code 7122(e) gives you the right to appeal any proposed rejection of an offer in compromise.
Internal Revenue Code 6159 prevents the IRS from rejecting, defaulting or terminating an installment agreement without first giving you the rights of an administrative review.
And don’t forget that Internal Revenue Code 6330 and 6331 requires the IRS to serve you with a Final Notice of Intent to Levy, and gives you the right to appeal (and stop) any IRS levy before happens pending your collection due process appeal.
An IRS collection enforcement agent may not take the time to ensure you understand all of your rights. They are busy, and their job is to collect, not provide you with your defenses. But you have rights as a taxpayer, and those rights are laid out in the Internal Revenue Code. Knowing your rights – and respectfully asserting them – is often an important aspect of successfully navigating through the IRS bureaucracy and resolving an IRS problem.