The IRS has huge power to do many things that will cause you great pain and suffering and loss of property, business opportunity and yes even your home…This we all probably understand, but a closer analysis of some of their collection methods is appropriate to remind you not to ignore them, there is a better path through cooperation then in avoidance. Just as the IRS code gives them power to liquidate, the same code gives protection to the taxpayer and ways to resolve the issues. They are workable if you know the path and have a guide or a map.
However there they have a few tricks you may want to be aware of.
You will be warned in writing that they are intending to lien and then levy your accounts. They will do this, it takes a while but eventually they get to it. Typically they will determine were you bank, and will levy all your accounts, removing all funds that are there, irrespective of checks written against the account and floating at that moment, they will simply all bounce. Frequently this will occur on a Friday afternoon as they are certain to get the payroll account at its highest balance. You will discover this Monday morning if not over the weekend when your employees are told they cannot cash their payroll checks.
Be aware, that while part of the strategy is to collect cash, part is also to get your attention so you work out the debt effectively. Be aware also that the IRS is not permitted to take money from your payroll account, although they do all the time. However it is beholden upon you the taxpayer to inform them and prove to them that it was payroll they got and they will release the cash levied in a payroll account immediately if challenged and you satisfy the burden of proving it was payroll. Again, they do this to make certain you pay attention to them and cooperate with their efforts to collect.
Some “smart” business owners figure this out and then either attempt to hide money in the payroll account or even use the payroll account as an operating account. This may work for a while but you will be discovered and this is why you must prove to them its current payroll they took (levied) and then they will release it.
As if that is not damaging enough, now you must find the funds to cover all the bounced checks. Their next trick can be fatal or at least very damaging to your ongoing business, when they levy your accounts receivable.
First you may have given them the information to do this during an interview were they ask specifically for you to name the accounts receivables and provide contact information. However they also have the power to look into your deposit history and determine who has paid you in the recent past and thus they make the assumption these may be ongoing customers who will owe you again and they levy them all, irrespective of whether or not they currently owe you anything.
You can only imagine the horror experienced when your best customers call you and inform you they are sending the check they owed you to the IRS as ordered by the levy. They then explain they will not be doing any further business with you for two reasons, first they are uninterested in having the IRS in their face because of you and the second being you are no longer deemed reliable and worthy of doing business with because they fear you will soon be gone…That’s the end of your business.
You may recover from this if your customers are loyal and if they are savvy enough to know the IRS will only send out a request and will do nothing to follow up on it, but it is a huge hit on your business status with your customer base being very unhappy and allot smaller then before this occurred.
In a word, when contacted do not ignore them, it time to work out the debt…somehow, and there are many ways. Call me if you need help. 413-549-2966. I typically leave Friday afternoons open as I also frequently get emergency calls on Friday afternoons, and yes you can guess the reasons why.
