Removing Levies and Liens

Tax levies and liens can be the kiss of death when they show up on your credit report.  In addition to lowering your credit score significantly, the credit bureaus are able to report these notices indefinitely until you settle your unpaid federal tax debt.

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A tax lien, more formally known as a Notice of Federal Tax Lien (NFTL), attaches to your personal property and informs the public that in the event you sell your property (while the lien is in effect) your debt will be paid off with proceeds from the sale. A levy on the other hand is a confiscation of the payment owed directly from your monetary accounts and/or paycheck. The best way to avoid either one of the aforementioned actions is to pay your debt in full before the notices are filed. The IRS also has a number of installment plans available if the balance is $10,000 or less.

 

New Developments

In recent years the IRS enacted the Fresh Start Program, an initiative which permits taxpayers to file for what’s known as a ‘withdrawal’ before the underlying debt is paid. Last year, the IRS issued close to 7,000 lien withdrawals—not nearly the number of liens issued, but definitely a clean slate for the individuals reprieved!

Do I Qualify?

In order to receive a withdrawal you must meet the following criteria.

  • Filed individual and business returns for the last 3 consecutive years
  • Tax liability has been resolved; lien has been released
  • Current on tax payments and federal deposits

If you meet the aforementioned specifications head over to the official IRS website and fill out IRS Form 12277, Application for Withdrawal. After the tax lien is withdrawn you can then contact the major credit bureaus and request it be removed from your credit report. In turn, this may improve your credit score.

Levies are a bit harder to remove because they are tied to your bank account via the IRS. The first step to take once a levy has been issued is to contact the bank and ascertain the details encased in the judgment. Confirm that the paperwork stipulates the accurate amount of debt you owe by gathering all relevant paperwork. To file a refusal of the levy, submit Form 9423, Collection Appeal or Form 12153, Applications for Collection Due Process Hearing. In extreme cases, bankruptcy may be a viable option if the levy in question is for a debt which cannot be discharged. Examples of this include child support payments, student loans and certain types of taxes. Levytaxhelp.com can help you determine exactly which options are available to you with the help of their certified attorneys.

The lien and levy removal process can be quite overwhelming for someone unfamiliar with the process. If you’re unsure what steps to take in the removal of these penalties or have other questions regarding IRS tax help, get in touch with a professional agency. There’s no better time than the present to get your finances under control.

Taxation for Expatriate Americans

Taxation is already a complex process in itself, even more so for American expatriates who have decided to enjoy the perks of doing business or retiring in countries where costs of living are much lower and therefore, preferable.

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There is an estimated 6-7 million Americans residing in foreign countries as of this year and regardless of where they live, they are required by the IRS to file a US tax return if they earn an income of $9000, earned both in the US and their country of residence.

Each US state implements different taxation rules regarding expats and state taxes. Some states release you from the responsibility of filing a tax return when you move away, while others will not. The national government has started imposing stricter tax filing requirements since 2008. In 2010, the Foreign Account Tax Compliance Act (FATCA) was announced.

What is FATCA?

Under FATCA, American expats would need to be more rigorous in filing income tax returns. Starting July 1 next year, financial institutions around the world will be obligated to report directly to the IRS all assets and income of US citizens with $50,000 on their books. Failure to comply would subject banks and financial institutions to withhold 30% of dividends and interest payments due to the banks.

FATCA was approved in a bid to recover an estimated $1 billion of unpaid taxes in US citizens’ assets abroad every year. US expatriates have always had to file tax returns and disclose all foreign accounts but with the new law, which would seem to allow the US government greater liberty to peek at their overseas assets, they could face huge fines if they do not.

Filing Tax Returns

Americans living abroad are due to file their US tax returns come June 15th or the following Monday if the date falls on a weekend or a holiday. Filing extensions can be moved as far back as October 15th. Filing your return takes the same process as when you were residing in the US. You need to fill out a 1040 form, on top of other forms, that declare your foreign-earned income and qualification for the Foreign Tax Credit.

Foreign-Earned Income Exclusions

US citizens who are bona fide residents of a foreign country for a period of time with one complete tax year are eligible for the Foreign-Earned Income Exclusion (FEIE). Resident aliens of the US whose home country has an income tax treaty with the United States, as well as citizens and resident aliens of the US absent from the US for a minimum of 330 days out of 365, may also qualify for FEIE.

How about Foreign Taxes Paid?

In general, taxes you owe the IRS on foreign income can be reduced and even waived if your country of residence has already taxed your income. You can make a claim on paid taxes in your Federal returns or claim the amount as an itemized deduction. The choice would largely depend on your country of residence and whether or not it has entered a tax treaty with the US. It would be useful to review the expat tax laws in your country of residence as well so you could manage your funds and pay just the right amount of taxes—no more and no less than that.

About the Author:

This article is prepared by Compare Hero for Bank Housing Loan. As Malaysia’s leading financial comparison website, users can compare credit card plans, personal loan plans, and other financial products free on the platform.

Why Small Business Owners Opposed to Online Sales Tax Bill

The days of the tax-free frontier of the online shopping world have come to a close with the Senate’s recent passing of a bill that will subject online shoppers to state sales tax. The bill received support from Republicans and Democrats and was passed by a landslide. Under the former law, online sellers only had to charge sales tax if the store had a physical storefront such as Best Buy or Target. Sellers such as Amazon and eBay that only existed online were exempt from having to charge state sales tax.

Ebay Explained 2006 (KLCC)

The advantage that gives online stores is not fair, according to the Senate and other entities. “We ought to have a structure in place in the states that treats all retail the same,” claims Matthew Shay, president and CEO of the National Retail Federation. “Small retailers are collecting sales tax on the first dollar of any sale they make and it’s only fair that other retailers who are selling to those same customers the same product have those same obligations.”
But while Shay claims small retailers need online companies to charge state sales tax, small online retailers are strongly opposed to the new bill. So which small businesses do we listen to?

Online platforms have changed the way small businesses get to do business. In fact, the internet has democratized the ability to own your own business. And American consumers have benefited from wider shopping choices and competing online prices.

Why Small Retailers Should Be Allowed State Tax Exemption?

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While larger online retailers that have to pay state tax because of their brick and mortar counterparts argue that small online retailers should pay state tax to even the playing field, the truth is small online retailers are operating at a higher cost than those giant companies. They are paying higher shipping and insurance rates that larger companies get bulk rate discounts on. Likewise, those online companies that also have brick and mortar store counterparts (brick and click retailers) do a lot more business because of their physical visibility. From 2008-2010, brick and click retailers increased their online sales from 33 to 38 percent, small online-only retailers saw their sales decline from 69 to 51 percent. Loading small online businesses with more online sales tax will further put larger corporations at an advantage over small online businesses.

Discrepancies in the Definition of “Small Business”

While the current tax bill exempts small online companies that sell under $500,000 of products, the Small Business Administration and foundations such as We R Here believes that the small business exemption (SBE) needs to be interpreted more widely to include larger online small businesses. According to the SBA, a “small” business is defined as a retailer with sales up to $30 million annually. Others argue that the small business should be defined by the number of employees rather than by sales numbers.

Hand full of Coins

The online commerce platform has proven an empowering medium for small businesses that are better able to succeed without the hefty overhead of a brick and mortar establishment. More needs to be done to determine the fairest ways to handle state sales tax laws for small online businesses. We’ve already seen small and local businesses pushed out by large corporations in the physical world. It would be a shame if the same thing happened online.

Stacy Hilliard is an author for several business blogs and suggests Northeastern’s online MBA degree program.