Dear Willie:
I got a Notice of Intent
to Levy. I am judgment proof except for wages and it takes everything I now make to live. What are my chances
of stopping the wolf at the door?
Sincerely, Worried
----------
Dear Worried:
It is good to hear from you. You have a typical problem that effects many individuals.
I would suggest that you follow these procedures: Go to my website and click the link to the IRS' website and download
the returns for the years in which you have not filed. If you don't have any records, check out their Statutory Notices;
you should be able to get the figures you need. Get your returns together and fill out the 433A from the IRS' website.
What is the bottom line? If you don't have too much in the way of excess income, you might consider asking the IRS to
write your account off as uncollectable. Remember also, to get the state returns prepared. The ideal situation is to
get the IRS to accept the case as uncollectable because you don't have any assets and your wages aren't enough to give you
extra funds. Then you can sit back and relax and look forward to a Chapter 7 Bankruptcy sometime in the future. You
will have to wait at least two years after the returns are filed. Of course, the IRS' position is that they
will not work out a payment plan or they will not take off the levy if the individual doesn't comply; so they require you
to volunteer whether or not you owe the tax. Remember that you simply cannot own property, real estate, etc. and fight
the IRS by not paying taxes. Also, transfers of property for less than market value may be considered by the IRS to
be a fraudulent transfer. So watch out if you are an individual who has property; it's a shame that you got yourself
onto the front lines.
Whatever you do, don't despair. The IRS seems to care more about the filing of the "delinquent"
returns than they do about collecting money. So, many times, they will be rather decent about taking off the levy and collecting
nothing; if the 433A shows an inability to pay. If your Revenue Officer will not work out a payment plan suitable to
you; be sure to ask to see his supervisor. If the supervisor won't listen, then there is the Problem Resolution Office.
I have found them to be very helpful. And if they don't listen there is the 911 Form and your Congressperson.
You can also file a bankruptcy.
Work out the best plan that you can and then start complaining. Filing returns under the conditions
above is not really a retreat; it simply makes good sense to give the IRS paper instead of money. After all, that is
what they want anyway. I do suggest, however, that you give a call for help with these maneuvers. The cardinal
rule to stay out of trouble is this: don't tell any lies and realize that the 433A might mean immediate seizure of assets.
Good luck and keep the faith.
-------------
Dear Willie:
I just did a FOIA request and I found a copy of a Form 4930 in my file. Can you tell me what
that form means?
Sincerely, Peter Patriot
--------------------
Dear Mr. Patriot:
The Form 4930 is the IRS Criminal Investigation Case/Project Report Form. It is used by special
agents and other district employees familiar with the facts, to provide case and project information to IDRS terminal operators
for input to the system. The IDRS is the IRS computer system and it has terminals all over the country. IRS workers
can instantaneously retrieve or update stored information and they can immediately get a video display of project
information stored in their system.
The IRS provides case numbers for each person or entity against whom a prosecution may be recommended.
When the Chief, Criminal Investigation Division, or his designate determines that an item has prosecution potential, a Form
4930 will be prepared by the initiating district. The Form 4930 must be prepared to initiate a project and it should
reflect all information that is available at the time of preparation. In other words, if there is a Form 4930 in your
file, it implies that the IRS has initiated a criminal investigation. You might check to see if there is a Criminal
Freeze Code of 914 or a "CRINV-Z" on your IMF Specific. If there is, then the IRS has frozen data entry to
your file and the Criminal Investigation Division has jurisdiction of your case. Let us know if you want to discuss
the issue further.
Dear Willie:
I filed a return that was normal except that I did not assess tax. I did however fill in the rest of the return
with my deductions and income, etc. The IRS assessed me a penalty for filing a frivolous return. What do I do?
Sincerely, Non-Frivolous
------------
Dear Non-Frivolous:
You can pay the $500.00
penalty and file a claim for a refund. You can use the 843 Form, which you can get a copy of in Chapter RL of the Anti-IRS Technical Manual.
Once the IRS denies the
claim, you have 30 days to file a refund suit in the District Court. If you need help, give me a call. If the IRS doesn't
answer your refund claim, you have 30 days after the six-month expiration period to file the suit.
Dear Willie:
I am currently receiving
harassment from the collection division. I never got a Statutory Notice and I was never allowed an audit. I know
that if I did go through an audit I wouldn't owe anything. I did file returns for the years in question.
Sincerely,
Harassed
-------------------------
Dear Harassed:
I have heard that story
more than once. It is a very common occurrence. Actually, the IRS might have messed up their Statutory Notice
procedures. We can find out. If you are in immediate danger of levy, you might file a 911 Form with problem resolution.
Explain that the IRS never sent you a Statutory Notice. Then do a FOIA request for all the information in the audit
division and the collection division. We will find out what the IRS did do.
If the IRS didn't issue a Statutory Notice,
they have problems and you can litigate the issue if the IRS won't back off. If they did issue a Statutory Notice we
can explain the problem and ask for audit reconsideration under Revenue Regulation Section 601.105(j). We can also request
that the IRS rescind the Statutory Notice
Dear Willie:
Does the IRS have the right to audit individuals for expressing ideas that they don't like?
Sincerely, Iconoclast
---------------------------
Dear Iconoclast:
It has been my experience
that the IRS can audit anyone for any reason and get away with it. Federal law theoretically prohibits the IRS from
initiating investigations of anyone unless there is reason to suspect that person has violated, or intends to violate, U.S.
tax laws. (26 U.S.C. Section 6103(i)(1) (1986). However, the IRS has investigated individuals and groups because of
their stand. If you want, you can read the Church of World Peace cases in the Tenth Circuit. The IRS audited the
Church of World Peace because their pastor was critical of them. Also the IRS has audited numerous groups
for First Amendment Activity. See Intelligence Activities and the Rights of Americans, Book 2, Final Report of
the Select Committee to Study
Government Operations with Respect to Intelligence Activities, S. Rep. no. 755, 94th Cong., 2d Sess. (1976) at 297-304 (recommendations) note 3 at 53n. 183, citing Memorandum, Attorney Assistant to Commission Director, IRS Audit Division, April 2, 1962; see also David
Burnham, A
Law unto Itself: Power, Politics and the IRS (1990).
The IRS has audited tax returns of people and
groups suspected of nothing but engaging in unpopular, though protected, First Amendment expression. For this reason
Congress passed 26 U.S.C. Section 6103(i)(1)(1986). But in spite of these so- called protections of the law, the government
audited individuals simply because they took a trip to Nicaragua. (See Nadine Epstein, "U.S. Border Agents Charged with
Rights Abuse," Christian Science Monitor, April 13, 1988; D. Burnham, "Foes
of the Reagan Latin Policies Fear They're Under Surveillance," New York Times, April 19, 1985 at B20.)
It is my opinion that
the IRS will continue to do whatever they want to do and it will be up to you and the rest of us to discover their errors
and fight back. When we get enough of us fighting, things will change. Thanks for writing, you asked a very good
question.
Dear Willie:
Recently the IRS levied my bank account. I had just sent some checks in for deposit but they had not yet cleared.
The bank paid the IRS for the checks that had not yet cleared. Can they do that?
Sincerely, Levied
_____________________________
Dear Levied:
Actually, the bank can
do anything it wants to do. However, if it gives money to the IRS that is not in its possession at the time the levy
was issued, you may have a cause of action against the bank. The liability of a bank under a levy upon a delinquent
taxpayer is limited by the amount of funds on hand at the time of the levy so that if the funds of the taxpayer are
subsequently reduced below the amount claimed in the notice of levy, the bank will be held liable for the amount withdrawn.
(See Commonwealth
Bank v. U.S., 115 F.2d 327 (CCA6, 1940); Citizens and Peoples Nat. Bank of Pensacola v. U.S., 570 F2d 1279 (CA5, 1978). The levy extends only
to property possessed at the time of the levy, which is the property of the taxpayer and in possession of the person on whom
the levy is made, (IRC Section 6331(b); HR Rep No. 1884 89th Cong. 2d Sess 57. I hope that helps to answer your question.
If not give me a call?
Dear Mr. Bankruptcy Expert:
I attended you seminar in Denver on Bankruptcy and I really enjoyed it. You are a great speaker and
you put together an excellent book. Considering the recent activity of the IRS, I am sure that it will become a bestseller.
I referred two individuals in your area to you last week. Hope you can help them.
I have several questions that I hope you can
answer.
1. I asked you
if a Tax Court proceeding would extend the three year statute for bankruptcy. You said, I believe, that it would not.
Elliot says that it will extend the three year statute on page 12-26 of his book (Exhibit attached). Could you clarify? How
about the 2 year statute for the filing of a return?
1. Answer: Eliot is partially correct. As I indicated
to you the discharge provisions for income taxes are found in the Bankruptcy Code, Sections 523 and 507. The basic theory
is that income taxes:
a. with a due date more than three years before the bankruptcy petition;
b. assessed more than 240 days before the bankruptcy petition; and
c. for a non-fraudulent
tax return filed more than two years before the bankruptcy petition will be discharged in a Chapter 7 bankruptcy.
Thus, a Tax Court proceeding
will not affect the so called "three year rule" because the due date of the tax return does not change whether or
not you're in Tax Court. The same thing is true for the "two year rule" because when a tax return is filed
is ordinarily not effected by whether or not you are in Tax Court. However, if a taxpayer is in Tax Court taxes generally
cannot be assessed. Thus, until an assessment is made, the 240 days cannot begin to run.
2. Also, does the filing
of a 911 Form stay the statute for the filing of a bankruptcy during the time it is pending? Does it stay either the
3 year or the 240 day statute?
2. Form 911, Taxpayer Assist Order (TAO) operates only to suspend the IRS statute of limitations
not any Bankruptcy Code provisions. Indirectly this could happen however if a tax is not assessed and a taxpayer gets
a TAO, then the statute of limitations on assessment would be suspended and the 240 day period does not begin to run.
3. I am now very
confused on the issue of the 2 year statue for filing a return. The Revenue Manual Section that you placed in your book
seems to say that if an assessment is over one year old on a three year old tax, that the returns don't have to be filed for
two years. However, the statute seems to say that the returns do have to be filed for two years. You gave an example
of a situation where you file returns the day of the Chapter 13 providing the tax was three years old and I understood you
to say that the tax could be bankrupted (as non- priority) even though the returns were filed less than two years before the
bankruptcy was filed. If a guy has five years of taxes due that are three years old with a 240 day assessment period
present, then he should be able to discharge those taxes according to disposable income. But what if he has three years outstanding
that are less than three years old and the IRS raises that issue in the confirmation hearing or puts in a proof of claim?
Does the filing of the bankruptcy prevent the IRS from raising the issue of the priority taxes for the current three years?
If so, I assume you can take advantage of the stay during the 3 year period and when the bankruptcy is over that you can ask
for immediate assessment wait 240 days, and then file another Chapter 13 on the newest three years. The question is
then does a current Chapter 13 prevent the 3 year statue from running toward the subsequent Chapter 13 since the IRS presumably
cannot collect on the current three years during the first Chapter 13? (I am thinking in terms of the rationale in Federal Tax Collections attached).
3. I'm not certain I understand your question. Let me say this.
Chapter 13 can be used to discharge income taxes even where no returns were filed by the taxpayer. Our procedure is to file
the income tax returns on day 1 and on day 2 or 3 (before they are assessed) to file the Chapter 13.
As to the so-called "three year rule" in my opinion it is not tolled by a Chapter 13 petition. The IRS and
some courts do not agree. Whether or not IRS could collect is irrelevant. The only question is: Are they a priority
creditor at the time the Chapter 13 petition is filed?
If you have any questions
relating to a specific fact pattern in the future, please feel free to send it to me. Incidentally, I may incorporate your
notion of a question and answer section in the future revisions to the book.
-------------------------
As you can see, even Willie has to ask questions, but that is
how we learn. The issue of bankrupting taxes is very important because it is one of the only ways individuals can escape
from the abject poverty created by a Federal Tax Lien. As you can see from this Dear Willie article, you do have to know what
you are doing.
Dear Willie:
I have two very important questions that I hope you can answer.
1. What is the
best way to let the IRS know that I have a change of address?
2. How can I prove that I filed back tax
returns for purposes of the bankruptcy?
Sincerely,
Mr. Question
________________________
Dear Mr. Question:
Thank you for writing. Your questions, although fairly simple are something that many people
overlook and it costs them a lot for doing so.
1. In response to your first question. The IRS has a form 8822,
which is used to tell them about a change in address. . Get the form from the IRS' website, which is linked, to my website
at anti-irs.com and make copies. Fill it out and mail it by certified mail to the appropriate service center listed
on the back of the form. Be sure to keep the return receipt and a copy of the form you sent in case they mess up and
send a Statutory Notice to the wrong address.
2. In response to your second question: It is my opinion that the
IRS deliberately trashes late filed returns so that they can prevent people from bankruptcy. You must be sure that you
can prove that you filed. Therefore, you must do the following:
A.
Send your returns in by certified mail return receipt and send each return in a separate envelope. When you get the
receipts back, staple them to the returns; make copies, and keep at least two copies of the returns in two different places
so you don't lose them. Alternatively, you can hand-deliver the returns to the IRS and get a stamp on your copy.
B. One Month after you file, get in Chapter FO in the Anti-IRS Technical Manual and get out a copy of form 4506. Send in Form 4506 and
ask for copies of your past tax returns that you recently filed. When you get the copies, make another copy and file them
in two separate places so you don't lose them. If the IRS claims you didn't file then you can immediately send the returns
to them again.
C. After you get copies of the returns, do a FOIA
request to the IRS to get your IMF. If the returns are not listed as filed, then send copies of the returns that the
IRS stamped as filed and ask them to record the returns on your IMF per the date they were originally filed.
If you do not take the above precautions, the IRS may claim that you never filed your back returns and attempt to keep you
from completing a successful Chapter 7 Bankruptcy against them. Sincerely, Willie
