Wage Garnishment

Wage garnishment and tax problems relief from TaxNegotiators

My caller was frantic. It was still early on a Friday afternoon in September 1999 and she had just got off the phone with her bank.

Her landlady had told her that the rent check had bounced and the bank told her the IRS had served a tax garnishment on her bank account and taken over $2,300 which she needed for the rent and groceries.

Her landlady wanted her rent money but there was no money left and my soon-to-be-client did not have enough to buy food the next two weeks.

"Could you help?" she asked me.

She told me her story: She had been traveling around the country on film assignment for several years and never seemed to land in one place long enough to get all her records in one place and she had not filed returns for six or seven years. It had not seemed important at the time and anyway she needed the money.

Now she had to pay the piper.

Her money had disappeared and she did not know what to do.

She appointed me and one of my associates to represent her regarding her tax problems and the account garnishment on a power of attorney and I called the I.R.S. that same afternoon.

In conversation with the IRS I determined that the IRS had seen she had self-employment income reported on Form 1099, there was no tax withheld and she apparently had taxable income.

The I.R.S. filed tax returns on her behalf, what are referred to as 'Substitute for tax Returns' and computed the tax as though she were a single person with no dependents (she was) and no expenses to offset the income.

They computed the tax over several years to an aggregate of about $40,000 and with the penalties of 50% and interest for several years the total amount was now over $75,000.

We arranged for the I.R.S. to suspend collection activity while we sorted things out and to give us time to prepare her tax returns. (Things are not that easy anymore. They changed the rules and now all returns must be on file before they will consider stopping a wage garnishment action).

I realized immediately that the I.R.S. had assessed a tax that was greatly overstated. My new client was self-employed and had very significant expenses for travel, auto and food and lodging expenses for out of town travel. And she had equipment purchases, cameras and the like, computers and software and on and on.

With the wage garnishment stayed for 30 days we began to assemble data to prepare tax returns. Even though some records were missing, receipts for hotels and food among other things, as she had kept a good Logbook of her travels we were able to figure the number of days on the road. With credit card statements we were able to closely estimate her expenses and we could also determine how much she had spent on equipment and some other costs.

Eventually we reduced her tax liability to about $10,000 for all 5 years she had not filed and with the penalties and interest she ended up owing about $20,000, or about 25% of what the I.R.S had computed.

Although she did not have that much cash on hand, we did arrange an installment agreement so that she could pay off the amount in just about 3 years at about $575 per month. This was doable, as her income had increased to where she was making over $100,000 in her chosen field.

Contact us for a free consultation on Wage Garnishment & Tax Problems.

We suggest you do not represent yourself.
The I.R.S. is your adversary in these matters.