Levy on wages without prior notice: HELP!

[SinkingFast]

What is the name of your state?What is the name of your state? Missouri

During my husband and his former wife's separation, he had moved out of the home and left all of his receipts, etc, relating to that tax year (yr. ending 1998) in the home. His (former) wife promised to surrender all papers but in the end she destroyed them. In the divorce my husband received all debts and she received all assests. In 2002 he filed for that year as well as for the following 2 years (he kept hoping up until she destroyed the papers that she would surrender them). When he did file for 1998 (which should have been filed by 4/15/99) he found that without his business, medical, ect., expenses he owed (somewhere around) $15,000. At the time he was unemployed (in the middle of a one year unemployed stretch). He became employed later that year, which involved a move to Missouri from TX and we got married as soon as his divorce was final. The IRS has applied our refunds the past two years to this tax debt, which has helped to offset the growing bill due to the penalties and interest. We received a notice in Nov., 2003, and another one like it in May, 2004. They both say the same thing which begins with, "We are required by law to remind you periodically in writing about your overdue tax..."
The letter states what is owed and a request for payment in full, or if that's not possible for us to contact them and set up a payment arrangement. Due to many things (struggling to get ahead with the hope of hiring a tax attorney, fear of what we would be told if we contacted them, and yes, some amount of procrastination) we did not contact the IRS. Though both letters end with the statement that they are authorized to take enforcement action (and what that includes) the letter in full does not sound very threatening. It ends with the request that we contact them within 10 days.
Extremely stupid on our part not to contact them? Absolutely. We made our bed and we should lie in it. However, I am desperately seeking advice for how to proceed in our current predicament. This past Friday morning as I looked at our bank account online to verify my husband's direct deposit from his employer I discovered that instead of the money that should have been there only $300 was deposited. He gets paid every two weeks. When I was finally able to track down what happened I was told that the IRS had put a levy on my husband's wages. I spent the remainder of the day on a wild goose chase (contacting a lawyer and a CPA, and the time involved in waiting for them to call me back) so by the end of Friday nothing was done. What makes all of this especially tough is that my husband was admitted to the hospital the day before this happened and is on very heavy pain meds and unable to think clearly enough to be of any help. I don't even know all of the exact details of the tax debt. (I do know he was working under contract with a company that required him to pay his own taxes, hence the large bill) I don't know how to proceed next. After spending most of the weekend doing research online (at the expense of leaving my husband at the mercy of the hospital staff for all of his needs) I feel that all I've accomplished is that in this scenario no one can be trusted and our outlook is very bleak. Because our resources are very limited (we own no property except the older car I brought into the marriage and have about $2,000 total on hand if I pay none of the bills that were due this week, including car payment on our other car and all of our utilities), I don't have much to work with as far as getting help. The lawyer's office I called couldn't help me but refered me to a CPA. The CPA couldn't help but refered me to another lawyer. At this point I'd run out of time in the business day. I've looked online but can't afford to be taken of the little resources I have. At this point I have not contacted the IRS. I feel that the best thing I can do is call about the Taxpayer Assistance thing on Monday morning. If I can't get the IRS to reverse the levy on my husband's wages (he's salaried so his hospital stay won't be affected unless he doesn't get well soon) we'll soon be out on the street. Our rent is due out of the next paycheck. I realize that the advice given here is just that, only advice from others, but I would be extremely thankful for some suggestions as to what my available options may be. I am really lost as to what our best bet for having the levy removed would be. Then there's the matter of what to do if I succeed in that. Bankruptcy? Offer in Compromise? Installment payments? I can't seem to find enough information to know what we would even qualify for.

Edited to add: the total tax bill now is right at $21,300.

Asking for a life line,
Sinking Fast.

 

[Snipes5]

1)Hire an attorney or an Enrolled Agent if you haven't already. This person should be able to help your husband craft an "offer in compromise", whereby the IRS will often accept pennies on the dollar.

2)Go to the bank and take any money you have in joint accounts out, and put it into accounts in your name only.

3)Unfortunately you're correct, you don't have many options. And you can rest assured that the IRS did NOT levy your husband's wages "without notice". All those 10 day letters that you received were your "notice".

4) And you most definitely SHOULD contact the IRS, but not on your own at this stage. Have your attorney or Enrolled Agent do it, because the IRS doesn't have a lot of sympathy for people such as yourself who have ignored repeated attempts to collect a debt.

Snipes

 

[SinkingFast]

Hi, Snipes.

Thank you for your suggestions. I appreciate the response. I do understand why the IRS resorts to such drastic measures to get people's attention. They certainly have ours. It's hard knowing that this tax debt should not even exist but because of someone else's spitefulness we owe this huge sum of money. A big part of our failure to deal with the problem was knowing that we did not have any resources to do an OIC and that if we tried to set up an installment plan we would never, ever have this debt paid (due to penalties and interest). And though I've reread the 2 letters from the IRS several times this weekend, the whole "Reminder Notice" thing just doesn't evoke visions of wages being garnished with no warning of it being imminent. Live and learn. I know we won't get much sympathy from any direction for failing to respond to an IRS request.
After looking at our options from every possible angle, our best bet in all of this would be to file bankruptcy. From what I've been able to gather we do fit the criteria for including the tax debt in a Chapter 7. My problem now is how to find a lawyer that is knowledgable in that area. They either advertise as covering the area of bankruptcy or the area of taxation, not both. I've even seen some advertisements that say it's not possible to include a tax debt in a bankruptcy. So I don't imagine this will be an easy job. If anyone has any suggestions concerning that aspect of my post I'd love to hear them.

Thanks again,
SF

 

[SinkingFast]

3)Unfortunately you're correct, you don't have many options. And you can rest assured that the IRS did NOT levy your husband's wages "without notice". All those 10 day letters that you received were your "notice".
Snipes

In regards to the statement that "All those 10 day letters" (meaning all 2) were "notice", what about the IRS tax regulation concerning due process in IRS collections (Section 3401)? The following statements came from their web site:

"We will also be required to notify the taxpayer in writing of our intent to levy and of their right to request a hearing during the 30-day period prior to levy action."

"The notice may be given in person, left at the taxpayer's dwelling or usual place of business, or sent to the taxpayer by certified or registered mail, return receipt requested, not less than 30 days before the day of the first levy with respect to the amount of the unpaid tax for the taxable period. The notification must state the amount of unpaid tax, the right to request a hearing during the 30 day period, the code provisions relating to, and the procedures applicable to, levy and sale, the administrative appeals available to the taxpayer with respect to such levy and sale, the procedures relating to such appeals, the alternatives available to taxpayers which could prevent levy (including installment agreements) and the provisions and procedures relating to the redemption of property and the release of liens."

I've seen their Intent to Levy notice (on their web site). It reads like this:

"FINAL NOTICE
Notice of Intent to Levy and Notice of Your Right to a Hearing
PLEASE RESPOND IMMEDIATELY"

We certainly never received that. The 2 letters we did receive say nothing in them about our right to a hearing.

I also found the same thing under "H.R. 2676, The Internal Revenue Service Restructuring and Reform Act of 1998", under the section "Title III, Section E. Protections for Taxpayers Subject to Audit or Collection Activities." This states:

"Before the IRS can levy against a taxpayer's property, it would be required to provide the taxpayer with a "Notice of Intent to Levy," similar to that currently required under section 6331(d). The notice would not be required to itemize the property the Secretary seeks to levy on. Service by registered or certified mail, return receipt requested, would be required."

Yeah...required. Right.

So what happens when they don't play by the rules designed to protect me? From what I can gather, not much of anything. However, maybe the info I provided above will help someone to get a little further along than I did. At least they'll know they're supposed to have rights where the IRS is concerned. And that a reminder notice does NOT give them the right to take one's wages without notice stating EXACTLY that and providing a means of obtaining help. Who knows, maybe someday someone will find a way to make them play by the rules.

Back to the paperwork mountain.
SF

 

[Snipes5]

They don't have to prove you received it, they have to prove that they attempted to notify you. Did you not state in your original post that he had moved?

How do you know they didn't leave it at his place of employment, or former place of employment? These questions are why you hire an enrolled agent.

The IRS isn't the big bad wolf. Don't assume that they're in the business of arbitrarily levying people's wages whenever they feel like it, because that isn't the case.

I find it nearly impossible to believe that in several years all they sent you were two letters. If the first letter you received was a "reminder", that means there is at least one initial thirty day letter, a ten day letter, and a notice of assessment that you have apparently never seen. All those come WAY before a levy.

And I'm willing to bet that the first letter they ever sent him was probably something harmless, like a request for more information.

The burden IS on the taxpayer to notify the IRS of a change of address, and the IRS will get progressively more annoyed with you if you ignore their inquiries. The fact that you moved away does not absolve you of the responsibility to answer them.

Besides, how do you know the ex-wife doesn't have a fat manilla folder someplace with 10 letters from the IRS in it?

Snipes

 

[SinkingFast]

I don't know that she isn't in possession of them. What I do know is that we've been at this address for 2 1/2 years and the 2 notices (Nov, 03, and May, 04) as well as the letters showing our yearly refunds being applied to the debt all made it here without any problem. Those refunds were all mailed from this address. This is the address that goes with the employer they garnished the wage from as we moved here from another state. (In the meantime, the ex has moved at least 3 times, the first time all the way across the U.S.) We did receive a notice that there was an error on our '02 return and that we owed them $1,221 (which included penalties and interest, of course). The amount of the refund that year would have covered it but alas, it had already been applied to the Big debt. We sent them a check for the full amount in September (in the time specified). Do you suppose our prompt payment of that bill had anything to do with the levy? It's a mystery to me. I'd have thought they would have figured, based on our quick response 2 months ago, that we would probably respond quickly to any kind of real threat.
Anyway, thanks for the dialogue. In a way it helps me sort through stuff as I go.

SF

 

[abezon]

1. Call the taxpayer advocate's office & tell them you did not receive the IRS notice of intent to levy & ask them to reverse the levy .. (Unlikely!)

2. Get the 1998 tax return to an enrolled agent NOW & amend the return to claim the expenses. If you can prove you had an expense, the IRS has to allow you a "reasonable expense" even if your records have been destroyed. This will reduce the base amount of the debt. Since you are still paying the debt, the tax year is still open for amendment.

3. Bankruptcy will stop the levy in its tracks & give you time to make an OIC or amend the return & refigure the amount owed. You can find a book on BK filing at the local library or bookstore. BK will also prevent your landlord from evicting you.

 

[SinkingFast]

My Resolution

abezon: thank you for your suggestions. I've been running non-stop and hadn't had a chance to thank you till now.

I just wanted to post that I did find a good tax lawyer and he was able to get the levy lifted, which included having the wages that were taken last Friday returned to us. We are working on an OIC and he feels our case is one that will be settled for "pennies on the dollar" (actually about 10 pennies on the $1). My husband comes home from the hospital tomorrow and when he is able to go in next week he and the attorney will finalize the offer. The attorney says he's submitted over 400 OIC's and has never had one turned down. I'm very grateful that ours has the makings of a happy ending and relieved that this will finally be behind us. Out of all the hours of research and out of our particular need and in keeping with the advice given me here, the most important piece of advice that I would pass on would be this: do NOT face the IRS alone. If there is any way possible (beg, borrow, break the piggy bank), hire someone who knows what they are doing to represent you.

Thanks again,
Safely ashore.