Additionally, missing tax returns within the six-year time frame are excusable if the individual did not accrue sufficient income to warrant filing a tax return.  For years when this was the case, a missing tax return does not have any effect on the taxpayer’s compliance.  More detailed rules concerning the necessity of filing a tax return may be found in IRS Publication 501, 2008, as there are considerable differences for each individual.  For example, a couple comprised of individuals under 65 who, when incomes are conjoined, makes below $17,900, does not need to file a tax return.  That number changes depending on marital status, whether the individual is the head of the household, age, etc.

On the other hand, in the event that a taxpayer is responsible for a missing tax return, he/she may still choose to avoid compliance with the IRS by not filing the missing return.  In this case, the individual runs the risk of a Substitute For Return being filed by the IRS.  A Substitute For Return does not add any exemptions the individual may be entitled to, as well as deductions or credits.  The other major risk the individual runs when they choose not to pursue compliance is collection by the IRS.

Housing and General Housing Expenses

Mortgage, rent, homeowner’s insurance, renter’s insurance, phone, sewer, garbage, water, gas, electricity, and other miscellaneous costs fall under this category.  It is important to note that many households go beyond the standard funds allotted to these allowable expenses, and the IRS is quite strict about not exceeding the standard limit for these subtractions from the Reasonable Collection Potential.

Vehicle Operating Expenses

All additional costs for maintaining a vehicle fall under this heading, such as fuel, insurance, repairs, registration, and maintenance (check-ups, oil and lubes, alignments, tire rotation, etc.).  However, those submitting an Offer in Compromise may be able to claim additional fees.  In addition, vehicles with over 75,000 miles on the odometer and over 6 years old qualify for an additional $200/month that will not be available to pay off tax debt.

The Necessary Expense Test

The expenses that meet the necessary expense test requirements are charges deemed the right of United States citizens, such as health insurance, term life insurance, mandatory retirement, union dues, and dependent care.  The individual must submit accompanying documentation for each of these costs in order to subtract them from the Reasonable Collection Potential.

Conditional Expenses

These are the expenses that fail the Necessary Expense Test, but in the event that the individual may still pay off the total tax debt within a 5-year time limit, they may be allowed.  Tuition, charities, credit card payments, and other expenses are some of the most common conditional expenses.

Some of the preceding expenses may be prorated if there are other, non-liable parties living in the household who generate income, which means housing and vehicle operating fees, for example, may be determined to be shared between the individual with tax debt and non-liable parties, dropping the allowable expenses.

Before an IRS Tax levy is placed on wages, bank accounts, tax refunds, etc., a Notice of Intent to Levy will be sent to the taxpayer, along with the individual’s rights to appeal the levy. If an individual does not respond in time to negotiate an alternate means of collection through any other IRS tax resolution strategy, such as seeking an Offer in Compromise, filing for Currently Not Collectible status, etc., the levy will be assessed.

The levy will then continue until the individual can accomplish one of the following. The easiest way to release tax levies is to pay the full tax liability, including interest and penalties. However, not all individuals have the luxury of deciding on the previous option, and must pursue other methods. Entering into an Installment Agreement with the IRS is one option, which entails the individual agreeing to pay the full liability in smaller payments over a prolonged period. It should be noted, however, that some Installment Agreements do not cause the IRS to release tax levies. Alternatively, an individual may file for Currently Not Collectible status after the levy has been issued, meaning that the IRS agrees that the levy is causing severe economic hardship. And finally, one may submit documentation to prove that, should the IRS release tax levies, the IRS could better collect on the tax liability.

In addition to actions an individual may take to fulfill or stop an irs tax levy, there are some circumstances that will see the levy released. For instance, if the statute of limitations expired prior to the serving of the levy, and the IRS is informed of this fact, then the levy will be dropped. Secondly, should the value of property being levied be greater than the tax liability, and releasing the levy on a part of the property could occur without affecting the ability to collect from the liability, then the levy will be released. This last circumstance is easiest to see in levies on bank accounts, from which the appropriate funds may be taken without continued seizure of the account.

The Federal Payment Levy Program (FPLP) allows for certain Social Security (SS) benefits to be subject to an IRS tax levy. In fact, all benefits described in the Social Security Act, Title II, may be levied, which includes, Survivors, Disability Insurance, and Federal Old-Age Benefits. To pay a tax liability, a 15% IRS tax levy may be assessed on any or all of these payments.

The FPLP is not restricted by the amount of SS Benefits an individual is left with, after taxation. This is due to the fact that the FPLP secures payment on tax liability, which is different from the stipulations of the 1996 Debt Collection Improvement Act, which holds $750 of any individual’s benefits as off-limits to satisfy debts, excluding tax debts. Because a Federal tax levy of this nature satisfies a tax debt, some individuals may be left with less than $750 per month.

The good news is, the FPLP excludes a number of Social Security Benefits, as well, such as those paid to children and lump sum death benefits, as well as those for taxpayers who were age 101 at the turn of the millennium. In addition, Supplemental Security Income payments and those with certain withholdings for SS debts are out of the FPLP’s danger, as well.

Prior to placing a levy on SS benefits, the IRS will send a number of notices, informing the taxpayer of the forthcoming levy and rights to appeal. One among these is the Final Notice of Intent to Levy. Afterward, if the taxpayer takes no action, then an additional notice, Final Notice Before Levy on SS Benefits, will be sent. 30 days after the date on the latter notice, a 15% levy will be placed on the taxpayer’s Social Security Benefits.