Understanding Tax and Debt Terms

Emerge180 Helps Negotiate with Creditors

“When company debts add up, it’s important to understand the terms used by creditors,” says Jonathan Field, CEO of Emerge180. His company provides expert help to businesses in financial crisis. A quick list of some of the common terms enables business owners to discuss the challenges that come with overdue and unpaid liabilities.

Lien: This provides a legal claim on property to secure the payment of a debt or obligation. It allows use of the property to continue.

Levy: Instead of a claim, property is seized.

Notice of Tax Lien: The IRS must notify the taxpayer in writing within 5 business days after the filing of a lien under these conditions:

  • The tax liability has been assessed
  • A Notice and Demand for Payment has been sent
  • The taxpayer has neglected or refused to pay or resolve the debt within 10 days of receipt of the notice.

Tax Levy: The IRS legally seizes assets to satisfy a tax debt including property, real estate and automobiles.  It is most frequently applied to bank accounts, securities, wages, and accounts receivable.  It bars further access to the seized items by the owner.

If there is no response after the IRS issues a “Notice and Demand for Payment”, the IRS may file a Tax Lien and then issue a Notice of Intent to Levy.  The IRS can empty a taxpayer’s bank account. The severity and complexities of a levy generally points to the need for Professional Representation.

Notice of Levy:  Before the levy, the tax liability must be assessed and the taxpayer must neglect or refuse to pay the debt. The Final Notice of Intent to Levy leaves at least 30 days before it levies your vehicle, house, or land as well as property held by a third party such as wages, bank accounts, and retirement accounts.

Bank Levy: The IRS can levy your bank account and take whatever money is there, no matter whose money it is.

Wage Levy (Garnishment): This orders an employer to withhold part of a person’s earnings to pay off a tax debt, including salaries, wages, bonuses, commissions, and retirement/pension earnings. They often seize up to 85% of a taxpayer’s take-home pay.

IRS Form 2848:  Power of Attorney and Declaration of Representative form is used to authorize a third party to discuss the tax issues with the IRS.

Statute of Limitations:  Ten years is the time in which the IRS or State Agency can collect on the tax.    For example, if the return from 2000 is not filed until 2004 and the tax is assessed in 2005, the 10-year period begins in 2005 and expires in 2015.Statute of Limitations for States varies considerably.

Reasonable Collection Potential (RCP):  A formula the IRS uses to determine the amount of owed taxes they expect to receive.

Trust Fund Tax Portion:  The money that the employer withholds from the employee’s paycheck for federal income tax withholding and the employee’s share of FICA and Medicare tax payment.

Emerge180 Helps Negotiate with Creditors – Contact Us Today