Paying taxes is an important responsibility that, if ignored, can cause a person serious financial and legal trouble. Individuals of all income levels are expected to fully and honestly fulfill their tax obligations, and the IRS is especially focused on bringing high-income individuals into compliance. The agency recently reported that agents will be increasing the number of in-person visits to taxpayers at high-income levels who have not filed tax returns or who have other compliance issues.

Commonly, a taxpayer incurs a tax liability not because they willfully refuse to pay taxes but because they have made a mistake or miscalculation and underpaid the IRS. Taxpayers may also struggle to resolve tax debt due to a job loss, major increases in expenses, unexpected medical problems, or other issues that cause financial hardship. If you have tax-related problems, do not wait for the IRS to visit you before taking action. Speak with an experienced tax law attorney and get the legal guidance you need to resolve these issues.  

What to Expect During a Face-to-Face IRS Visit 

If you know that you have not filed tax returns for previous years or have not resolved your tax debt, you may be worried that the next knock at the door could be from an IRS officer. However, IRS visits are rarely a surprise to taxpayers. The IRS will attempt to contact a taxpayer through mail several times before visiting him or her. If an officer does visit, he or she should provide two forms of credentials to prove his or her authenticity. The officer will then share information with you about your tax liability. He or she will not threaten you or demand immediate payment. Instead, he or she will explain the steps you need to take to become compliant as well as the consequences for continued noncompliance.

Paying taxes is an important and often complicated responsibility. If a taxpayer does not adequately fulfill his or her tax obligations, the Internal Revenue Service (IRS) can take several actions. In some situations, the IRS may even seize some of the taxpayer’s personal wealth and property to satisfy his or her tax debt. If you have been contacted by the IRS about a tax liability-related concern, you should speak to an experienced tax attorney to get the legal guidance and help you need.  

What Is an IRS Levy?

Many people do not realize that the federal government is permitted to seize some of an individual’s assets if he or she does not pay his or her taxes. If you have an unresolved tax debt, the IRS may eventually use a levy to collect the delinquent tax. Before the IRS issues a levy, it will send you a “Notice and Demand for Payment.” If you do not respond, you will then receive a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” If you still do not resolve the debt or make an arrangement with the IRS for settling the debt, the IRS may be permitted to take ownership of your property.

What Types of Property Can the IRS Take?

The IRS is permitted to levy any property that you personally own or property in which you have an interest. The IRS could levy your bank accounts, part of your wages, accounts receivable, dividends, income from rental properties, retirement accounts, business assets, and more. The IRS could also seize personal property such as vehicles, and if approved by a U.S. District Court Judge, even your home. The IRS cannot levy assets that you did not own or did not have an interest in at the time the levy was enforced. For example, if a relative gifts you money and you add it to your bank account after the levy was issued, these funds are not subject to the levy. The IRS will also not levy:

Taxpayers often make errors on their tax returns that are due to simple miscalculations or misidentification of assets and income. These mistakes rarely lead to criminal charges, and they can typically be rectified with help from a qualified tax lawyer. However, when a taxpayer or business makes a deliberate effort to avoid tax liability, this may constitute illegal tax evasion. Tax evasion is a serious crime punishable by up to 5 years’ incarceration and fines up to $250,000 for an individual or $500,000 for a corporation. In recent years, the Internal Revenue Service has dramatically increased enforcement of income compliance with regard to offshore accounts. The United States, however, is not the only country that is concerned about the increasingly common crime of offshore tax evasion. Recently, the U.S. was joined by several other countries in a “day of action” against offshore tax evasion schemes.

IRS Continues to Investigate Potential Facilitation of Tax Evasion

The Sixteenth Amendment to the U.S. Constitution and a number of other laws dictate Americans’ tax obligations. In order to avoid paying their fair share of taxes, however, some individuals and businesses transfer assets outside the United States and into offshore tax shelters. Tax evasion is a massive problem that is estimated to have cost the U.S. federal government $458 billion per year from 2008 to 2010. Tax evasion schemes occur in developed countries around the world. 

In 2018, the Joint Chiefs of Global Tax Enforcement was formed by leaders in the United States, the United Kingdom, the Netherlands, Canada, and Australia to coordinate efforts to fight global tax evasion. The recent “day of action” occurred as part of an ongoing investigation into a financial institution in Central America that may be facilitating tax evasion and money laundering. The Joint Chiefs of Global Tax Enforcement have reason to believe that some taxpayers are anonymously hiding assets and laundering profits from criminal activities using this institution. Using interviews, subpoenas, search warrants, data analytics, and other intelligence, a great deal of information was uncovered about this institution and the activities taking place there. A number of civil and criminal actions are expected to result from the information gained during the investigation.

Many people have strong feelings about the inheritance they plan to leave to loved ones when they pass away. After working hard to acquire assets throughout your life, you do not want the value of these assets to be reduced through estate tax or gift tax. If this is something you are concerned about, you may be interested to learn about an estate preservation tool called the unlimited marital deduction.

The Unlimited Marital Deduction Allows Married Couples to Be Treated as One Economic Entity

The unlimited marital deduction lets an individual leave money or property to his or her spouse without incurring immediate federal taxes or penalties. The value of the property that you can transfer is unlimited, and this transfer can take place during your lifetime or upon your death. In 1982, the unlimited marital deduction took effect, eliminating the federal gift and estate tax for property transfers involving spouses. This provision changed the law so that married spouses are now treated as one financial unit when it comes to property transfers.

The Marital Deduction Delays Estate Tax Liability

Spouses have the opportunity to transfer all of their property to a surviving spouse if they choose to do so, and they can do this without incurring federal gift tax or estate tax liability. However, this property is still included in the surviving spouse’s taxable estate, and it is therefore subject to taxation when the second spouse passes away. The unlimited marital deduction effectively delays the estate tax liability until the second spouse in a marriage passes away. It should be noted that in order to take advantage of the unlimited marital deduction, the spouse receiving the property transfer must be a U.S. citizen. However, other estate planning instruments such as a qualified domestic trust may help those who are not yet U.S. citizens gain the marital deduction and reduce their estate taxes.

Perhaps no other piece of California legislation has caused as much of a stir in recent years as Assembly Bill 5 (AB5). The bill was signed into law in September 2019 and went into effect on January 1, 2020. AB5, nicknamed the “gig worker bill,” significantly limits when employers can classify workers as independent contractors. Many companies that rely heavily on independent contractors are concerned about how the legislation will affect their ability to stay in business. The trucking industry has been one of the most vocal critics of the bill, and some recent developments may affect how these companies will operate going forward.

California Trucking Association’s Lawsuit Regarding AB5

Assembly Bill 5 instituted an “ABC test” for determining whether a worker can be classified as an independent contractor. According to AB5, all workers must be considered employees unless the following three criteria are met:

1. The worker is able to carry out services free from the direct control of the company.
2. His or her work tasks are not part of the company’s usual course of business.
3. He or she is performing work that is of the same nature as that which he or she is ordinarily engaged in.

Many trucking industry employers and workers are especially concerned with part B of this test. Along with two owner-operators, the California Trucking Association (CTA) filed a lawsuit to fight the new restrictions regarding worker classification. The association argued that the legislation will threaten the livelihood of over 70,000 truckers who are currently classified as independent contractors. The CTA further contends that the new restrictions implemented by AB5 conflict with the Federal Aviation Administration Authorization Act of 1994 and the Federal Motor Carrier Safety Act.