Taxes

Is TaxSmith Trying to Scare Me With a Levy Threat?

Written by Steve Rhode

Question:

Dear Steve,

Worked with TaxSmith for IRS help. Debt about $55k. TaxSmith got me into a CNC status. They now saying the IRS has sent them levies for hundreds of clients. I’m unemployed (unemployment ran out) and my payments TaxSmith were put on hold until working again.

They were fine with it as long as I attempted to pay even a little bit towards the debt.

I think they’re using this as a ploy to get me to pay them now. If they got levies against their clients, shouldn’t the clients receive copies of the notices? I’ve received no such notice and my emails about not receiving copies are still unanswered.

It’s not that I don’t want to pay them, but if they’re using fear tactics to collect, I’d like to know.

Thank you

Anne

Answer:

Dear Anne,

It would be impossible for me to guess what TaxSmith is or is not trying to do. You mentioned your account was currently in a CNC or Currently Not Collectible status.

It’s not clear what small payments were going towards if your account was in a CNC status. According to Winspear Law Group, “If at any point in this process the taxpayer can demonstrate that the payment of the back taxes, either through voluntary or enforced means, would create an “economic hardship” on the taxpayer, then the IRS will close the collection case by placing the taxpayer’s account in “CNC” status. This simply means that the IRS inputs a computer code on the taxpayer’s account that reflects the fact that the taxpayer cannot afford to pay the back taxes and meet his or her minimum monthly living expenses.”

The IRS says, “While your account is in CNC status, the IRS will not generally engage in collection activity. For example: It won’t levy on your assets and income. However, the IRS will still charge interest and penalties to your account, and may keep your refunds and apply them to your debt.” – Source

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It would not be unheard of for TaxSmith to receive a number of new attempts to collect. Last year the IRS began sending out more accounts to private debt collection companies for attempted collection. And who knows what those private collectors might be saying to “encourage” people to pay.

One question that is worth pursuing is if TaxSmith might have changed your mailing address with the IRS so notices are just not going to you.

Your options at this point if you are not satisfied with the response from TaxSmith is to seek a second opinion from a qualified tax professional or call the IRS for some clarity. I think the second opinion route is the smarter thing to do. One place to find someone who might be able to give you that second opinion if TaxSmith won’t respond to you would be through the National Association of Enrolled Agents.

If your taxes owed are more than three years old you may be able to discharge them in bankruptcy. In that case you should talk to a licensed bankruptcy attorney in your state.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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