Tax liens can be stripped off in reorganization proceedings (Chapter 13) to the extent that the lien does not attach to equity in property. Tax liens can’t be avoided in Chapter 7 on the grounds that they impair exemptions; if the tax is dischargeable in the Chapter 7, the bankruptcy court can determine the amount of the lien that is secured at the time of the filing. Payment of that sum entitles the debtor to the release of the lien.
We have successfully negotiated the release or modification of wage and bank levies by the Internal Revenue Service and State tax agencies like the California Franchise Tax Board (FTB) for some of our clients, but not all will qualify. Likewise, we have also been successful at convincing the Internal Revenue Service and State tax agencies to remove erroneous tax liens filed against some clients which had prevented them from buying or refinancing a residence. However, this can take time, and a lot of patience.
Federal and State tax laws generally allow the government to involuntarily collect from you taxes, penalties, and interest they claim you owe without a Court order or judgment. Although the primary method of collection is placing a tax levy on the wages and bank accounts of a taxpayer, occasionally they will also seize an automobile, retirement account or real property.
Wage levies, particularly those imposed by the Internal Revenue Service can be financially devastating as they force the employer to turn over most of the wages of the employee to the Internal Revenue Service. In most cases, the issuance of a tax levy can be often avoided if the Internal Revenue Service or State tax agency can be contacted in time. Although the case is generally made more difficult once a levy is in place, it is still possible to negotiate a levy release or modification.
Tax liens appear on the credit report of the taxpayer and are generally filed in various counties in order to secure the claim of the government against any property owned by the taxpayer. Tax liens are particularly problematic if you own any real property including your residence or you are trying to obtain any type of loan.
While tax collection laws do give the government broad powers, taxpayers have been given a number of rights, including the right to a Court hearing if it is believed that the collection action being taken by the Internal Revenue Service is illegal or unfair. However, the right to a hearing is subject to very strict time and procedural constraints.
If you have received a notice that your wages or bank accounts have or will be subject to levy by the Internal Revenue Service or State tax agency like the California Franchise Tax Board, you should call our office. We may be able to help you negotiate a payment plan and avoid a crippling seizure of your bank held assets.
While income taxes generally can be dischargeable in Bankruptcy, they must meet a complicated sets of rules, to determine eligibility. These rules govern if and when an income tax can be discharged. There are also Bankruptcy alternatives like the Offer in Compromise program provided by the Internal Revenue Service, which may be a better option than Bankruptcy. This is something we obviously would check out as a possible option.
If you owe income taxes and want to know your options, give me a call. Bankruptcy may be one option, but there may be others. While It’s important to consider all options, it takes an attorney familiar with both tax strategies, as well as bankruptcy and non-bankruptcy alternatives to determine the best course of action available in your specific circumstances. For example, when to file bankruptcy is a major consideration if you owe dischargeable taxes. Filing for Bankruptcy even one day too early could render a tax debt non-dischargeable. This means that you will still be stuck with having to pay the taxes after your bankruptcy is complete.
If you have a tax issues, or other financial problems, give my office a call. I will personally meet with you and provide you with practical options to your problems. Call the Law Offices of Paul M. Allen today and schedule a free consultation. Glendale Office: (818) 334-5445 or (818) 552-4500, Cerritos Office (562) 356-9931 or (562) 865-4480
(This article is for information purposes only, and does not necessary reflect the company’s opinions and views on general issues. We make no warranty, prediction nor representation, nor do we assume any legal liability for the completeness of any information and its effect on any case. Each case is different and results depend on the facts of each case. Consult with and retain counsel of your own choice if you need legal advice.)