Tuesday, August 28, 2007

After Foreclosure, a Big Tax Bill From the I.R.S.

By GERALDINE FABRIKANT - New York Times

Two years ago, William Stout lost his home in Allentown, Pa., to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for $1, county records show.

Despite the setback, Mr. Stout was relieved that his debt was wiped clean and he could make a new start. He married and moved in with his wife, Denise.

But on July 9, they received a bill from the Internal Revenue Service for $34,603 in back taxes. The letter explained that the debt canceled by Wells Fargo upon foreclosure was subject to income taxes, as well as penalties and late fees. The couple had a month to challenge the charges.

For those who struggle to pay their bills, who watch their housing payments rise out of reach with their adjustable-rate mortgages, who lose a job or who fall victim to illness, losing one’s home can feel like hitting bottom. But one more financial indignity may await as the fallout from the great housing boom ripples across the United States.

“Getting that tax bill,” Mrs. Stout recalled, “my first thought was that I needed to see my family doctor to help me with my stress, because we had a big mortgage and other debt and then here came the I.R.S. saying we owe this.”

Notices of unpaid taxes, unanticipated and little understood, will probably multiply as more people fall behind on their mortgages, said Ellen Harnick, senior policy counsel at the Center for Responsible Lending, a nonpartisan research and policy center in Durham, N.C.

Foreclosure is one way that beleaguered homeowners can fall into this tax trap. The other is when homeowners are forced to sell their homes for less than the value of the mortgage. If the lender forgives that difference, they are liable for income taxes on that amount.

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy.

The Center for Responsible Lending expects that 20 percent of the home loans made in 2005 and 2006 to people with weak credit, commonly called subprime loans, will end in foreclosure. Because so little money was required as a down payment during the boom, the value of many of these houses may be less than what is owed.

Some people in this predicament are fighting the I.R.S. and winning. Sometimes, lower payments can be negotiated with the I.R.S., tax experts say.

In other cases, bankruptcy or a claim of insolvency can eliminate the tax burden. Sometimes, the bills are sent out erroneously, as banks fail to keep track of home values and what price the properties ultimately sell for.

“The tax laws are far too complex for borrowers to understand,” said Kurt Eggert, a professor at Chapman University School of Law, noting that there are distinctions between selling a house for less than the loan amount and losing one in foreclosure. He says it is crucial to get expert tax advice to sort through the bewildering complications.

The whole concept can be counterintuitive. “Your home has declined in value and you lose it,” Mr. Eggert said. “Then the I.R.S. says you owe tens of thousands in taxes because you got a windfall when the debt was forgiven.”

Mr. Stout has suffered doubly from the downturn in the housing market. He earned $65,000 last year as a salesman for a roofing company. But last winter, his job was cut from a salaried position to an hourly one. Then his hours were reduced, as construction demand eased. Through July he had earned only $25,000, said his lawyer, Stephen G. Doherty, of Bennett & Doherty in Doylestown, Pa., putting him on pace for a pay cut over all this year.

Mr. Doherty set out to appeal the Stouts’ tax bill by arguing that Wells Fargo got the home as collateral so the family did not reap a benefit. The Stouts and their lawyer also hoped to show that Wells Fargo was able to sell the house for far more than $1. Finally, they contended that penalties were inappropriate because they did not receive a tax notice in 2005 or 2006.

After a reporter inquired about the Stout matter, Wells Fargo Home Mortgage said last week that it had reviewed the Stouts’ tax documents and was filing a corrected 1099 tax form to show that no debt had been canceled, because the fair market value of the home was actually more than Mr. Stout had owed.

Mr. Doherty, the Stouts’ lawyer, pointed out that the acquiring lender, in this case Wells Fargo, has some leeway in valuing a house. The fair market value can be the high bid at a sheriff’s sale, or an alternative valuation.

In this case, Wells Fargo’s about-face was tied to an appraisal that Mr. Doherty says he believes was completed before the sale. It set the value of the house at $132,844, eliminating the Stouts’ liability. (Lenders do periodic appraisals once a property is in default, Mr. Doherty said.)

The Stouts found in county records that Wells Fargo had sold the house to U.S. Bank for $106,000 — the same amount Mr. Stout had owed — in March 2006. The house was resold that month for $140,000.

An I.R.S. spokesman would not comment on the Stout matter or how the agency applies the tax rules on forgiven debt, but referred to a document on the I.R.S.’s policies.

Diane Thompson, a lawyer in Godfrey, Ill., for the National Consumer Law Center, says the tax can be a real hardship for some people.

She recalled a client who owed $39,000 to her lender and got a tax bill after her house was sold in foreclosure for $10,000. Ms. Thompson appealed to tax authorities, contending that her client, a part-time waitress, was broke because her debts were greater than her assets.

“If you can prove you are insolvent, the I.R.S. does not treat the forgiveness of debt as income,” Ms. Thompson said. Her client did not have to pay.

Lawyers may also be able to show that the original loan process was so flawed that the borrower is not liable for taxes. Indeed, during the real estate bubble, lenders and mortgage brokers sometimes encouraged homeowners to borrow more based on inflated home values.

Such was the case with Agnes Mouser, a 65-year-old widow who works in the records department in a Houston prison. In 2000, she sought to pay off her credit-card debt with a loan from Beneficial Finance, which sent an appraiser to assess the value of her home.

“A real nice young man came out to see me,” Mrs. Mouser recalled. “He could have been my grandson.”

That appraiser compared her 1977 mobile home with two new standard homes with two-car garages. Using those homes as benchmarks, Beneficial agreed to lend $34,730 on her home, valued at $43,500, in 2000. Mrs. Mouser’s loan carried an interest rate of 14.88 percent, and she paid 7 points, or $2,431, at closing to get that rate, along with $270 to Beneficial for the appraisal.

A spokeswoman for HSBC, the parent company of Beneficial, said it did not comment on matters involving specific customers.

In 2003, when Mrs. Mouser could not meet the payments, she contacted Ira D. Joffe, a lawyer in Houston. He found that her property was valued by the county at $19,970, less than half of what Beneficial had estimated.

“I promised to depose the appraiser’s Seeing Eye dog if there was a lawsuit,” Mr. Joffe recalled telling Beneficial.

Beneficial released the lien. But then Mrs. Mouser got a tax bill for $10,000, or the amount owed on the $29,566 that Beneficial had treated as a canceled loan.

“The tax bill scared her to death,” Mr. Joffe recalled. “It took a letter from an accountant and two letters from me to get the I.R.S. to go away.”

Monday, August 27, 2007

IRS Wage Garnishment Release

IRS Wage Garnishment

Owing back taxes is not a pleasant experience for anyone. The government needs their money and will not let up on anyone regardless of the situation they find themselves in. Depending on the amount that is owed, many people cannot get their hands on the entire amount within the allotted time period. When a full payment is not received by the IRS, they may put a wage garnishment order into place.

The IRS will determine your wage garnishment based on the amount of money you owe and what they consider a reasonable amount of time to pay off this debt. They will also look into the amount of money that you bring home each month. By law, a certain percentage of your paycheck must be left over after a garnishment so that you will be able to pay for living expenses. The number of dependents that you have will also play a role. If the wage garnishment amount set by the IRS exceeds that percentage, they will only receive the allowed percentage by law instead.

Once the IRS determines a wage garnishment, an official garnishment order is sent to your place of employment. Your employer must then, by law, remove this amount from your paycheck each pay period and send it in to the IRS. The IRS will then apply these payments towards the back payments that you owe. The wage garnishment will last until the entire debt is paid off or until the IRS decides that the amount you have paid is sufficient. In most cases, the IRS will not allow the garnishment to expire without the entire debt being paid. However, a knowledgeable and skilled tax attorney may be able to stop your IRS Wage Garnishment.

Advantages And Disadvantages To An IRS Wage Garnishment

There are many advantages and disadvantages to having the wage garnishment. One of the biggest disadvantages is the fact that you are not left with a lot of money. In many cases, there is nothing left for the extras that a person is used to having in life. An advantage to the wage garnishment is that you will not need to worry about setting aside monthly payments to the IRS.

Finding an IRS Tax Attorney

Finding the right Tax Lien Attorney

Each year, many people run into problems while filing their taxes. In some cases, the problem is a human error on the taxpayer's part. In other cases, it may be a simple oversight that most people would have overlooked. In any case, it is not all that uncommon for taxpayers to end up with a notice from the IRS that there is a problem. If the problem is too severe, the IRS may end up taking out a lien on the taxpayer's property, which can be a larger problem for the taxpayer.

Dealing With The IRS

In the case of a lien by the IRS, a taxpayer should seriously consider getting an attorney to help sort through the issues. Dealing with the IRS can be complicated and having an attorney on your side that knows the tax laws is an important asset. Instead of trying to muddle through the problem on their own, the taxpayer will know that the error or other issue is being corrected properly to help avoid future problems.

A tax lien in place by the IRS is a very serious issue and even if the problem is resolved, the tax lien may still be in effect for a period of time. A tax lien attorney will help a taxpayer work with the IRS to get the lien removed quickly. This will help make the negative effects of the lien disappear quickly and allow the taxpayer to continue on with their life. A tax lien by the IRS freezes all of the taxpayer's assets including their home, vehicles, and bank accounts making financial moves practically impossible to execute.

A tax lien attorney will be able to talk a taxpayer through all the steps that are necessary to remove the lien and get on with life. In many cases, repaying the debt may be the only way to remove the lien, but in some cases an attorney can help you to deal with the IRS and come to an agreement. If you need to find a tax attorney visit: www.mandalelaw.com.

Unforseen IRS Tax Problems & Audits

Unexpected Tax Problems

In some cases, IRS tax problems may be unexpected and scary. In these cases, the person is generally not prepared to deal with some of the consequences that may result. They may not know what steps they need to take and what can be done to solve the problem. This is where IRS tax help can be very beneficial.

When a people are married, the tax return is generally filed in a joint status. In this situation, both people are held equally liable for any problems that may arise from tax problems that are discovered. In most cases, there is nothing to worry about for either party, but in some instances, one spouse or the other may have a problem that the other is not aware of. Divorces are a situation this problem most often occurs. In the case of a divorce, a tax lawyer may be necessary for protection of your credit.

For others who have tax problems and owe the IRS large amounts of money, they can claim hardship status to receive IRS tax help. In many cases, paying back the IRS all of the money at one time can cause the person and their family to suffer. They may not be able to afford payments for things like groceries, electricity, and home payments. If a person can claim that they have financial hardships, creating a payment plan with the IRS is a possibility. A person should hire an attorney to help with this step towards repaying the IRS.

Preparing For An Audit

One of the scariest things that a taxpayer may have to deal with is a word audit. Each year, many tax returns are flagged for audit due to suspicious looking items on the tax return. Likewise, other tax returns each year are randomly audited. The word audit can be a scary thing, but in many cases the audit will turn up nothing meaning the tax return is fine as filed. But in the case that the audit does turn up a mistake, hiring an attorney to prepare your audit defense may be the best option. Many people are not familiar with all that is involved and a tax attorney can help.

Settle IRS debt for Less

IRS Tax Help

Almost every person in the United States is required to file their income taxes with the IRS. In doing so, some people will receive a refund due to overpayment of taxes taken out of their weekly paycheck while others will find themselves in a situation that requires a payment made to the IRS. In some cases, a person may require various types of IRS tax help to assist them in making the proper payments to the IRS.

Settling Your IRS Debt

In some cases where a large amount of money is owed or the amount of time since the debt was accrued is long, making use of special government programs for IRS tax help may be an option. With these programs, the person that owes the IRS money can make an offer for a lower amount than what is owed. When this option is taken, it will usually cost the IRS some money, but the debt has been there so long that the IRS is generally willing to settle.

Another form of IRS tax help that many people can take advantage of is an installment agreement. In this type of agreement, the debtor will repay the IRS in installments. Usually, payments will be made on a monthly basis. By making these types of arrangements the IRS will not taking collection steps such as wage garnishment or liens.

Other IRS tax help that is available to people who have had issues with their taxes include tax lien help. In the situation where a person owes the IRS money specifically if it is a larger amount or an older debt, the IRS may place a lien on your future tax returns or some of the other assets that you own in order to make sure that at least some of the money owed to them is recovered. In many cases, removing these liens can be nearly impossible, but with the help of a good lawyer, a lien may be withdrawn in certain cases.

Solutions to IRS Tax Problems

Help With IRS Tax

Problems with taxes and the IRS are a problem that many Americans must deal with each year. In many cases, a person does not run into problems, but sometimes due to circumstances beyond a person's control, some problems may occur. There are ways that people who run into problems can receive IRS tax help, however.

For one reason or another, some people may fail to file their federal taxes for one reason or another. In these cases, serious IRS tax help is generally necessary. It is easier for a person who is only behind a year or two to get caught up without too many issues. But being behind for a longer period of time can cause serious issues. Hiring a lawyer to help a person file their back taxes is probably the best option since these forms can be complicated and difficult to understand.

IRS Wage Garnishment

In many cases, the IRS will begin a wage garnishment order for those behind on tax payments. For many people, especially those who are living paycheck to paycheck, a wage garnishment can mean much bigger problems for their family including not having enough for a house payment, food, or other important monthly bills. Hiring a lawyer for this type of IRS tax help is probably the best move that people in this situation can make. In some cases, these lawyers can have the wage garnishment removed. In other situations, the wage garnishment must remain in place, but a lawyer can negotiate with the IRS to get the garnishment reduced to an amount that is more manageable by the family.

Some of the problems that require IRS tax help are not the result of a mistake made by the tax payer. In some instances, the mistake is one made by the payroll department at their place of employment. Especially with some small businesses, the company may fail to take out the proper amount or even fail to send in the deducted amount to the IRS at all. This mistake can be made due to a simple oversight.

Tax Liens And Repayment Issues

IRS Lien Problems

The IRS utilizes many different tools to collect on the debts that many Americans owe each year. They can put things into place such as wage garnishments, tax liens, and payments plans. Depending on the amount of money owed to the IRS and the amount of time money has been owed will help to determine the type of repayment plan that is used. Each individual situation requires a different solution. One of the most extreme methods IRS imposes on a taxpayer is a tax lien.

Tax Lien Problems

A tax lien can cause a lot of problems for the taxpayer. The lien is placed on all of their assets which make financial moves nearly impossible. This lien can be issued for anything from failure to pay income taxes or delinquent taxes on personal items. The lien will affect everything that the taxpayer owns including their home, cars, and bank accounts. In most cases, the taxpayer will not notice there is a lien on their property since they are still in possession of the property. It is when the taxpayer tries to sell their property or apply for a loan that they will notice the problem. This makes it difficult to repay the debt.

Tax lien problems are not easy problems to deal with. In some cases, a person may try to sell his or her home in favor of a cheaper one to help pay off the debt to the IRS. A tax lien will prevent this from taking place. In some cases, hiring a tax attorney can help to convince the IRS to lift the tax lien and allow the taxpayer to take out a loan or sell their assets in an effort to pay off the debt that is owed. In these cases, the IRS may temporarily lift the lien and give the taxpayer a chance to make good on their debt. If the debt is paid, the IRS will not need to reinstate the lien. But if the taxpayer fails to pay the debt after given this second chance, the lien will be reinstated and likely will not be removed again until the debt is repaid.

Repayment of Property Tax Related Tax Liens

IRS Lien Problems

A tax lien is a big problem for any taxpayer. A tax lien is defined as a federal government ordered liquidation of a person's property until federal taxes and debts are paid in full. Property assets are immediately liquidated so that a sly taxpayer cannot attempt to sell off property before the debt is paid. This IRS lien problem can create considerable difficulty for the targeted taxpayer and he or she may be in need of experienced assistance.

Solving Your IRS Lien Problem

The first solution of course would be to pay off the tax debt. Additionally the debtor with the tax lien problem can setup a repayment agreement with the IRS such that installments of the total debt are paid monthly until the full amount is paid off. This type of agreement may include penalty fees. At this point a tax attorney would serve the debtor extremely well. The tax attorney would help establish the clearest and fairest system and conditions for repayment.

Every state has different laws, regulations and statutes that define the terms for tax lien certificates, and these are changing regularly. This is yet another reason why it would be a good idea to seek guidance from a tax attorney, who would be completely up to date on all of the laws and proper measures for your state.

Finding the Right Tax Attorney to Assist with IRS Lien Problem

If you are experiencing a problem as significant as an IRS lien you want to make sure that your guidance is offered by only the most experienced and informed tax expert. The attorneys at Mandale Law Firm are tax specialists who offer the most personalized approach possible for their clients. They are excellent resources for anyone with a tax lien problem. For more information visit www.mandalelaw.com.

Protection Against IRS Problems

IRS Tax Help

Dealing with the IRS is not a simple task, especially for someone unfamiliar with all the tax laws. Federal and state tax laws can frequently change to keeping up with tax laws can be difficult for the average taxpayer. Hiring an attorney to help the taxpayer resolve their problem with the IRS is one of the best moves the taxpayer can make. Getting tax help before the problem gets out of hand is very important.

Tax attorneys can offer an exceptional amount of assistance to a taxpayer. Even if you are a taxpayer that has been deemed delinquent with your taxes, tax attorneys can offer you the guidance you need.

For many people, the fear of doing something wrong when filing their taxes can be difficult. Some people falsely feel that not filing their taxes will cause the problems go away. In reality, however, they are just creating a bigger problem for themselves that will generally require an attorney to fix. The IRS does not appreciate when a person tries to evade their taxes regardless of the reason behind it. Having a tax attorney look over your taxes prior to filing them may be a better solution than letting the taxes goes delinquent.

Human Errors Can Create Tax Problems

For other people, a simple oversight or a human calculation error can be the source of their IRS tax problems. These problems can come to light either through an audit or red flag that is raised when being reviewed by the IRS. When these problems occur, the taxpayer is generally given an opportunity to fix the error. Errors will accrue interest, so fixing them quickly and properly is very important. For this reason, hiring a tax attorney to help you sort through your taxes and corrections quickly will help minimize penalties.

Hiring tax help right away is the best way to avoid all potential problems. Visit www.mandalelaw.com for more information about tax law.

IRS Tax Liens

Problem With A Tax Lien

When a person owes back taxes, the IRS will often place a tax lien on the person. This tax lien can cause many issues with a person's credit and they will not be able to qualify for loans and may even have trouble getting a job. Tax lien problems are not easy to fix, but hiring an attorney can be the first step to correcting these issues.

When a person owes the IRS back taxes, the IRS will generally place a tax lien onto the taxpayer's assets. This is only done once certain requirements have been met. Not everyone is qualified for a tax lien to be put in place. But, once the tax lien is in place, the IRS will begin to levy the assets in an attempt to regain some of the amount that is owed.

Problems will arise for the taxpayer due to the tax lien being in place. They will begin to have problems dealing with anything that requires credit. It may even affect the ability of a person to sell their house even if that would mean that the profits would be used to pay back the debt. Because these problems are so severe for the taxpayer, avoiding a tax lien problem is the best course of action.

When Avoiding A Tax Lien Is Not An Option

When avoiding a tax lien is not possible, employing the help of a tax attorney can help alleviate the effects of the tax lien or even get it completely lifted in certain cases. In some cases, an attorney may be able to convince the IRS to release the lien with a particular lender allowing the taxpayer to take out a loan to pay back the IRS.

If you are struggling with the IRS visit: www.mandalelaw.com.

Federal Tax Liens

IRS Lien Problem

When a person has a federal tax lien placed on their assets, it can be devastating. Dealing with the IRS can be very difficult so hiring an attorney for IRS tax help may be the best option for you. They will be able to help you deal with a tax lien.

IRS Tax Lien Problems

A federal tax lien is commonly put into place when a taxpayer owes back taxes to the IRS. With this tax lien, a freeze is generally put on all of the person's assets. This includes the home that they live in, the money that they have in the bank, as well as any vehicles that are owned by the taxpayer. The lien will be in place until the entire debt has been paid back to the IRS unless an attorney helps to solve the problem. Once the debt has been paid, the person must file to have the lien removed.

When a tax lien is in place, it will not affect the daily life of the taxpayer unless the person tries to buy and sell property or acquire credit. A person will not be able to apply for any loans or credit cards, even if he or she intends to use them to pay back the IRS. The person will also not be able to sell his or her house without paying off the IRS debt. In some cases, an attorney can help you with this problem by petitioning the IRS to allow you to take out a loan to pay them back or to agree to a lower sum of money to remove the lien.

Another way to alleviate tax lien problems may be to develop a payment plan with the IRS. An attorney can help you with all of the paperwork that is required and can help you to make an offer to the IRS. In some cases, the federal tax lien may still be a problem until the payment plan has been completed and the lien is removed.