Taxpayer’s Legal Defense

ProAdvocate Group PMA’s Position on Filing Federal and State Returns and Paying Income Taxes:

  • Proper and timely income tax returns must be filed for each tax year for each legal and tax entity.
  • The income tax due and owing on the return must be paid when it becomes a proper and legal income tax liability.
  • The taxpayer has the legal right to challenge IRS assessments, liens, levies or garnishments where proper and legal procedures were not followed by the IRS according to the IRS Code and

Regulations and other recognized law, including Court decisions. Legal issues not supported by statutes or court decisions may not be used to challenge IRS assessments, liens, levies or garnishments.

 Taxpayer Rights: Things You Need to Know

The Right to Say “NO” to a Tax Auditor Don’t hold your breath waiting for the IRS to tell you this, but your rights go way beyond just “the right to remain silent!” The idea of saying “NO” to an IRS auditor may terrify you, but it shouldn’t. Why? Because the auditor never has any final authority over you or how much you owe. As much as they may huff and puff, you have the right to challenge his or her decision. Here’s the best part: If you do challenge, the IRS’ own statistics reveal you will win your case about 64% of the time. We’ll take those odds any day!

The Right to Eliminate Penalties

A common issue taxpayers tangle over with the IRS is penalties – probably because the IRS has a penalty for every day of the week. In fact, there are over 150 different penalties contained in the tax law, and the IRS can find one to hit you with at every turn. On the plus side, each penalty is subject to cancellation … though the IRS generally “forgets” to tell you this (surprise, surprise). That means that all penalties can be canceled when you can show you acted in good faith and not out of an effort to deceive the IRS. In most cases, a simple letter of explanation setting out all the appropriate facts will do the job.

The Right to a “Correspondence” Audit

Do you dread the thought of facing the IRS in an audit? Our advice is simple then: Don’t! We’re not telling you to hop the first plane to the Bahamas, but we are saying you have the right to conduct a correspondence audit through the mail. Think of the benefits: You avoid the stress of a face-to-face meeting, the hassle and expense of taking time off work and the possibility you will say something that can be misconstrued by the agent. Simply ask for a “correspondence” audit and take some of the pressure off.

The Right to an “Installment” Agreement

If you do end up owing the IRS money, things can get ugly … and fast. Their notices make it clear they want the money now — all of it. What they don’t make clear is your right to an installment agreement. To negotiate a reasonable payment, get a copy of IRS Form 433-A, the Financial Statement. This lists your income, expenses, assets and liabilities, and will accurately present how much you’re able to handle paying. Unfortunately, the IRS now charges a $43 user fee on installment plans. But, paying $43 is better than having to come up with big money you don’t have right now.

The Right to Challenge IRS Notices

The IRS mails tens of millions of notices each year, most of which are demands for more money. But don’t automatically reach for your checkbook! According to the Government Accounting Office, 48% of these notices are “incorrect or incomplete.” So why does the IRS keep sending them? Because research has shown that, rather than fight the IRS, most taxpayers would rather cough up the money! Don’t let Uncle Sam pull one over on you. You can challenge and cancel those notices if you disagree and act promptly.

The Right to Use the Problems Resolution Office

The IRS is a huge bureaucracy, which can make it incredibly frustrating to deal with, even to get the most obvious errors corrected. If you are ever backed into a corner by the IRS and no one seems willing or able to help, your best bet is to contact the Problems Resolution Office (PRO). This office was set up to assist citizens whose problems seem to fall through the gaping cracks in the floor of the IRS’ “We Care” Department. Some problems can even be handled with a simple phone call.

The Right to Make Audio Recordings of Any Meeting With the IRS

If you’re audited by the IRS or are subject to a tax collection procedure, you are allowed to tape record the meeting. However, you have to notify the IRS 10 days in advance of your meeting. Taking advantage of this right prevents the IRS from changing the rules midway through the audit. It also helps control the meeting — it limits discussions of irrelevant and unnecessary issues as far as the topic at hand (your potential tax liability) goes.

The Right to Appeal Any Decision Made by the IRS 

This is one of your most important rights, so don’t forget it. Whether you’re faced with an audit, lien or some other judgment by the IRS, you have the right to appeal. If you do get audited and you’re not satisfied with the results, you can appeal to the IRS appeals office. You’ll then have 30 days to exercise your appeal rights, though it could be a year or more before your IRS appeals audit is heard. Save yourself a few headaches, though, and don’t even come close to getting audited — we’ll show you how by making sure your deductions are airtight!

The Right to Represent Yourself Before the IRS 

That’s right — you CAN act as your own best advisor when faced with an audit or with having to go to United States Tax Court, but tread carefully here … this is one right you may NOT want to exercise. Only consider representing yourself if you’re audited for something fairly simple, confident in your tax knowledge, familiar with all of the most current IRS tax laws and be prepared for any items of dispute that the IRS may question you on. As far as standing up in U.S. Tax court, however, be mindful you’re walking on very thin ice. Tax laws can be very complex (and the judgment outcomes can be harsh), but that goes especially for matters brought before the U.S. Tax Court!

Don’t Lose Another Nickel to the Bank of Uncle Sam!

The next time the IRS comes knocking on your door, remember these rights before forking over any of your money. You have a voice, and you shouldn’t let the IRS intimidate you into thinking any differently! By exercising these rights and protecting your money, you’ll significantly increase your chances of settling any disputes without losing another nickel to the Bank of Uncle Sam.

The Twelve (12) Steps

IRS Proper Procedures to Create an Income Tax Liability Assessment for Collection 1.) Obtain correct net income information by legal methods from a taxpayer. 2.) Determine an Income Tax Due Owing or Bill of a certain income. 3.) Issue a Ninety (90) Day Notice of Deficiency Assessment – Petition U.S. Tax Court with Stay. 4.) Execute Income Tax Record Liability Assessment – (Form 4340) concerning a certain taxpayer. 5.) Issue a Sixty (60) Day Liability Assessment with Notification between 90 and 150 days from Notice of Deficiency if U.S. Tax Court is not petitioned. 6.) Provide Income Tax Record Liability Assessment (Form 4340) to the taxpayer upon request under IRC § 6203. 7.) Offer to the taxpayer an IRS Appeals Officer Hearing notice before filing or issuing IRS Liens and/or Levies under IRC § 6320 and/or § 6330 with stay if requested within thirty (30) days. 8.) Conduct an IRS Appeals Officer Hearing concerning the filing or issuing of IRS Liens and/or Levies against the property of a certain taxpayer. 9.) Provide IRS Appeals Officer Hearing Determination Letter to the taxpayer. If adverse, IRS must allow thirty (30) days to Petition U.S. Tax Court with Stay. 10.) If U.S. Tax Court and Federal Appellate Court decisions are adverse, the taxpayer should request the new Income Tax Record Liability Assessment (Form 4340) showing the Final Judgment and Liability Assessment. 11.) Issue Sixty (60) Day Liability Assessment Notification between 90 and 150 days after Final Judgment and Liability Assessment. 12.) The Final Deficiency and Liability Assessment must be made within three (3) years from the filing of the income tax return for that tax year or the assessments would be outside of the statute of limitations.


If the individual or organization served does not comply, they can experience grave IRS problems. What if a levy on my wages is causing a hardship? Contact the IRS at the telephone number on the levy or correspondence immediately and explain your financial situation. Service is avaible from 8 a.m. to 8 p.m. local time, Monday through Friday. If the levy is creating an immediate economic hardship, the levy may be released. A levy release does not mean you are exempt from paying the balance. The IRS will work with you to establish payment plans or take other steps to help you pay off the balance. To help ensure quick action, please have the fax number available for the bank or employer office that is processing the levy.

Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy. If you are behind on tax payments there could be additional help available if you are facing an unusual hardship situation. For assistance with your back taxes contact the phone numbers listed on your IRS correspondence.

Filing a claim for reimbursement when we made a mistake in levying your bank account If you paid bank charges because of a mistake we made when we levied your account, you may be entitled to a reimbursement. You will have 30 days to appeal the determination to the Tax Court. Use Form 8546, Claim for Reimbursement of Bank Charges Incurred Due to Erroneous Service Levy or Misplaced Payment Check (PDF). Bank Levies  If or when the IRS levies a bank account, the levy is only enforced for the particular day in which the bank received the levy notice. The bank is required to remove whatever amount is available in the person’s account, but ONLY on that particular day (up to the amount of the IRS levy). The bank then sends it to the IRS within 21 days unless notified by the IRS. This type of levy does not affect any future deposits placed into the bank account, unless the IRS issues another Bank Account Levy. Wage Levy or Wage Garnishment The difference between an IRS Wage Levy and Wage Garnishment is entirely different. A Wage Levy is filed with the taxpayer’s employer and remains until the IRS Wage levies are filed with the employer. They remain in effect until the IRS alerts the employer that the wage levy has been relieved. Generally, the wage levy takes so much money from the taxpayer’s paycheck, there is hardly enough money left for the taxpayer to survive. Can a Levy Be Appealed?  A levy can be appealed. In fact, in many cases, Centsable Accounting, Inc. clients utilize our services to request a Collection Due Process hearing with the Office of Appeals. The grounds for a levy appeal covers the following: * All taxes owed have been paid prior to the IRS sending the levy notice. * If the IRS assessed the tax and sent the levy notice when the taxpayer was in bankruptcy, the levy is subject to an automatic stay during bankruptcy. * A procedural error on the part of the IRS was made during the assessment. * The statute of limitations (time to collect the tax) expired prior to the IRS sending the levy notice * No opportunity was afforded the taxpayer to dispute the assessed liability.

* The taxpayer makes a request to discuss collection options

* A spousal defense is made by the taxpayer. What Occurs at the End of the Appeals Hearing?  When an appeals hearing concludes, the Office of Appeals issues a determination at which time the taxpayer is given 30 days to contest the determination. Should the taxpayer’s property be levied or seized, they should contact the IRS representative who took the action. The taxpayer may also request that a Manager review their case. If the taxpayer is still uncertain as to the unresolved matter, a Manager can explain the taxpayer’s right to appeal to the Office of Appeals. At what point does an IRS levy of wages or a bank account levy end?  The levy on your wages, salary or federal payments by the IRS ends either when the levy is released or the taxpayer pays his or her tax debt. It may also end if the time for legally collecting the tax has expired. What is the Typical Amount Levied or Garnished by the IRS from a Taxpayer’s Paycheck? Generally speaking, the amount levied or garnished is 30-70% of the gross paycheck, but the amount is based on a formula driven process. How long must the bank hold funds on deposit if the IRS levies a bank account? The bank must hold funds on deposit up to the amount owed, for a total of 21 days. This period allows for time to resolve any problems from the levy. But once the 21 days passes, the bank must send the money plus interest, if it applies, to the IRS. If there is not enough money in the account, all money will be removed and your account will usually remain frozen until the debt is paid off. IRS has special rules and requirements for IRS Bank Levy releases. Not only do they follow the general rules for their wage levies, but they have additional and very specific requirements that must be met before they will release a bank levy. If a bank levy has been placed on your account by a creditor, you usually have 30 days to contest the levy (in the case that monies that were seized are exempt). If a bank levy occurs, you should contact the court to find out how to file for an exemption immediately. A Bank Levy is a tool used by the “enforced collections” department to collect back taxes owed. Both the IRS and State Taxing agencies use the method. An IRS bank levy is a “one time” levy of funds that are in the account at the time that the bank receives the levy notice. The bank is instructed to hold or a freeze these funds for 21 days then they send the funds to the IRS. State agencies have different usually shorter holding periods. The Levy can be released during this holding period – but only under certain circumstances. We can help you to release your bank account funds. You have to act quickly and precisely to clear this collection action! In most cases, a levy can be released if the IRS can be assured of getting paid the taxes due or if a real hardship is created by the levy. But remember, you only have a short time to make arrangements with IRS before the bank is required to pay the money over to them. How to Release / Stop the IRS Bank Levy In order to stop or release a bank levy it is important to act fast or it can be too late. There are many different methods you can use in order to release the bank levy. The method you choose should be dependent upon your tax and financial situation. The IRS does not want to levy your bank account, they would much rather resolve taxes in another manner and they do offer quite a few options to taxpayers and do have solutions for every taxpayer for every situation. The only problem with releasing a bank levy is that the IRS has already classified you as an uncooperative taxpayer and may be more hesitant to work with you, for that reason it is a great idea to hire a tax resolution firm to handle the IRS bank levy release situation on your behalf. The IRS will be more willing to work with a tax resolution firm because it shows them you are making a commitment to resolving your tax problem. How to Appeal an IRS Bank Levy You always have the right to appeal a tax levy. When the IRS sends the “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” they state you have 30 days to file for an appeal (hearing), you can file for an appeal within those 30 days or even after. Understand the reasons why you can file for an appeal. An appeal is a great way to stop the tax levy if you do not agree with the filing of the levy. We give many examples as to why you can file for an appeal, find out if you may have a case. Ways To Stop A Bank Levy: IRS Bank Levy Release 1) Hardship Plan: Send a letter to the IRS with evidence proving that if they Levy your Bank Account you will not be able to meet the standards of basic living. (Declaration of Indigency) 2) Payment Plan: Negotiate a payment plan with the IRS that will have you paying a monthly amount on your debt. The Bank Levy will be removed as long as you continue to pay monthly and on time. 3) Negotiate a Settlement: It will be hard, but you can negotiate a settlement with the IRS to have your debt quickly paid in one lump sum. With the help of a tax professional this could become a reality.Case Law Related to IRS Bank Levy, etc. in the 1990’s, before the Taxpayer’s Bill of Rights Mrs. Shaw received a refund of all the money collected, and the remaining tax liability was abated. Shaw v. U.S., Fifth Circuit. The government dismissed the criminal action against the plaintiff. Fishburn v. Brown, Sixth Circuit, 1997. The IRS returned a seized Cadillac. Washington v. U.S., Ninth Circuit, 1992. The propriety of the defendant’s (IRS/US) calculation of the plaintiff’s tax liability was resolved in the plaintiff’s favor in tax court. Templeman v. U.S., First Circuit, 1994. Improperly levied funds were returned. Raymond v. U.S., Sixth Circuit, 1993. The government conceded that an assessment was erroneous and released its liens. Miller v. U.S. (N.D. Cal. 1992). The government provided the forms during the litigation that they had previously refused to. Ball v. U.S., No. 94-2125 (7th Cir. 1995).After the Taxpayer’s Bill of Rights, Case Law Gandy Nursery v. U.S, 5th Circuit at How to Remove a Lien or Levy: Those involved in property investment are well aware of tax liens and levies – these are the homes and properties we want to avoid! Knowing that there are outstanding taxes due is enough to make any investor go on to the next property. Most of the time, the lien doesn’t actually mean they take or “seize” your property; it just makes it very difficult if not impossible to refinance or sell the property. All the information can be found in a simple title search. The only way to proceed with the sale or refinance is to have the IRS discharge the property from the lien. Sometimes the IRS will accept the equity on the sale (if there is any) in exchange for discharging the lien.

Something to really consider is that since liens and levies are public record, they could affect other parts of your life. One thing for sure is that they will show up on your credit reports. You don’t want a lien or levy to wreak havoc on your life! You need to deal with it. The bottom line is the tax needs to be paid off, plain and simple. If not, it will also affect other property the taxpayer may own. IRS Liens

The IRS has been known to get the lender/bank to decrease the monthly payments so that the property owner subjected to the lien will have the funds to pay the IRS. Notice of Tax Lien filings are done at the Office of the Recorder of Deeds for the county where you live. IRS Levies A levy is more serious than a lien. With a levy, the IRS can seize your property and your bank account could be frozen up to the amount of the levy for 21 days. You can also challenge the levy, but if not successful, the funds are automatically given to the IRS. If this doesn’t work, they will garnish wages.  The Difference Between a Lien and a Levy The simple difference between a lien and a levy is their effects on the property you own. A lien is a claim registered against property for not paying taxes. It does not deprive a taxpayer of their property or the right to transfer property. Levies usually happen because of bad communication between the taxpayer and the IRS. A Levy is a seizure. It essentially takes your property and transfers ownership to the government.