Joe came into my office with a pile of letters. Some were unopened, but one that drove him to make an appointment with me was from the state department of revenue.
That one was the Intent to levy or garnish from his state department of revenue.
He figured that he had taxes withheld from his paycheck, so he didn’t need to do anything more. That is until the state sent a letter stating he owed tens of thousands of dollars, and they were going to garnish his wages in payment!
He was not sick.
He was not a victim of a disaster where he lost all his records or property.
Joe was just lazy.
Our tax system is what we call self-reporting. What that means is that while the federal government and state we reside receives information from our employer, bank, investment broker, mortgage company and others they do not see everything that could reduce the taxes for the year.
This is why having the IRS or state prepare your taxes is not a good idea.
Is Joe married and his wife does not work? The agencies do not know that, and his taxes are lowered based on his filing status.
Does Joe have children?
Did he take a loss on all those stocks he sold for $100,000? The agencies see he received $100,000 and they want 100% of the taxes on that money.
If Joe did not file for many years, he may have been due refunds and now they could be lost due to the statute passing. He could get what they said he owed lowered or removed if he files. If he owes the IRS back taxes, there is a 10-year statute to collect beginning when the RETURNS WERE FILED. Filing 2018 in 2023 the statute starts when they receive the return.
After I told Joe that yes, they can do garnish his wages, but we can start to fix his problems.
This is not a quick fix I tell him as some of the returns in question must be mailed and then processed by hand.
The state can require any and all years to be filed. The good news is that there are only four years unfiled. And did he not receive any letters from the IRS as well?
Stay tuned for more of Joe’s tax dilemma!
Joe’s tax garnishment issues Part two
After getting our poor taxpayer Joe to get me all the letters and notices he had, signing an engagement letter to prepare the back taxes, signing an engagement letter to assist with the past tax issues and filing tax power of attorney for the State and a tax authorization form to get any wage and income information from the IRS I sat down to prepare the returns. And finally having all the information regarding his filing status, current address, I saw that Joe’s issues were not as dire as he thought.
Yes, he had sold stock, and the broker was able to provide the information to reduce his amount of profit.
He did not have all of his W2 forms, and the IRS transcript system does not show state taxes withheld but I had enough to file the federal return. The good news was that Joe worked for the same family-owned business for years and he thought they could get him how much they reported as state taxes withheld.
He took money out of his 401K and was not at least 59 ½ so there was additional penalties and taxes to be paid as he had nothing withheld.
By the time we were finished with all past years Joe owed a sizable amount but there were now options for him to begin paying. It cost him a lot of money to get everything completed and for me to speak to agents on his behalf to stay the garnishment/levy issue, but he learned his lesson. The hard way. In his wallet.
Joe and his wife are now 10 year returning clients of mine. Back tax issues are behind them, and they are using my services to save money and reduce their tax bill legally.
Don’t ignore the letters from the tax agencies. Open them up and call for help if needed. What if one of the letters stated that “we have your return and see that a refund is due to you, but you failed to sign the return. Please sign where indicated and return it to us so that we can complete processing your return.