Did you know that some IRS collection practices are categorized as ‘unauthorized,’ that is, prohibited? This means you do have certain rights and options for repayment when it comes to the IRS attempting to collect your federal taxes from you.
Did you know that some IRS collection practices are categorized as ‘unauthorized,’ that is, prohibited? This means you do have certain rights when it comes to the IRS attempting to collect your federal taxes from you.
For example, Internal Revenue Code Â§ 6321 allows the IRS to place a lien on your property for unpaid taxes, but three prerequisites must be met before this action can take place:
-Assessment must be made on taxpayer;
-Demand for payment must be made; and
-Taxpayer must fail to pay said assessment.
Until 1988, taxpayers who’d been the focus of unauthorized tax collection practices by the IRS had little recourse. They could not, for example, bring suit because such suits were forbidden under the doctrine of sovereign immunity. In 1988, however, Â§ 7433 was enacted, and later amended in 1996, which states:
“If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. … such civil action shall be the exclusive remedy for recovering damages resulting from such actions.”
Damages are capped at $1 million (negligence at $100,000).
For example, willful violation of the Bankruptcy Code’s automatic stay can result in a damages award for the taxpayer of up to $1 million.
There are certain limitations and prerequisites for bringing suit. Â§ 7433 (d) states that all administrative remedies be exhausted first (ie taxpayers must navigate all internal steps within the IRS as an administrative agency before being allowed to bring suit in federal district court); damages must be mitigated by the plaintiff; and there is a two-year statute of limitations on such an action:
That’s why it’s so critical to move quickly once you receive any type of collection notice from the IRS!
Additionally, the IRS is limited by the Fair Debt Collections Act just like every other creditor attempting to collect a debt from you.
You are encouraged to pay as much as you can now in federal income taxes to avoid late penalties and interest, but if you cannot pay the full amount, following are three alternative payment options you should know about:
1. Additional Time to Pay You may be granted a short additional time to pay taxes in full based on individual circumstances. You may request such an option by filling out an Online Payment Agreement application or by calling 800.829.1040. An additional 30 to 120 days may be granted and taxpayers will pay less in penalties and interest by using this method than if the debt were paid via an installment agreement.
2. Installment Agreement You may apply for an IRS installment agreement using the Web-based Online Payment Agreement application if you owe $25,000 or less.
3. Pay by Credit Card or Debit Card Taxpayers may put taxes on their American Express, MasterCard, Visa or Discover cards. Additionally, you can pay by using your debit card. There is no IRS fee for credit or debit card payments, but processing companies may charge a convenience fee (service providers may charge a convenience fee based on the amount of taxes being paid and, if paying by debit card, service providers charge a flat fee of $3.89 to $3.95).
For more info:
IRS misconduct (video)
Electronic Payment Options
Form 9465, Installment Agreement Request (PDF 100K)
IRS installment agreement http://www.irs.gov/businesses/small/article/0,,id=108347,00.htmlPartial Pay Installment Agreements
What is an Offer in Compromise?
Publication 17, Your Federal Income Tax (PDF 2,072K)
Identity theft secrets, guest writer, Sami K. Hartsfield, ACP, is a paralegal in Houston with experience in commercial litigation and tax law. She holds a degree in paralegal studies and a bachelor of science degree in political science. After interning with Texas’ 14th Court of Appeals under Chief Justice Adele Hedges and completed the University of Houston Law Center’s Summer 2008 Prelaw Institute, she is preparing to enter law school this fall. Sami holds a national advanced paralegal certification, and four specialty certifications: Discovery; Trial Practice; Contracts Management; and Social Security Disability Law. More helpful tax information can be found at her National Tax Law Examiner page.