The recent government shutdown prompted in part by junior Texas Senator Ted Cruz could have unexpectedly positive effects for individuals with delinquent income taxes. This comes after the Internal Revenue Service announced that it would suspend all new asset seizures and will only enforce existing seizures in a handful of exceptional cases.
The law typically allows IRS agents to seize assets, such as real estate, bank account funds and physical property from individuals who have failed to pay taxes. Experts were concerned that the government shutdown could make the effects of these levies far worse since all IRS officials tasked with helping those accused of delinquency avoid seizures were furloughed. The IRS’s decision to temporarily halt seizures may be a response to those concerns. In all, the IRS has furloughed well over 88,000 workers – over 90 percent of its total workforce.
The federal tax agency reported that it will still pursue any criminal collections cases or those in which failure to take “immediate action” could cause substantial damage to the “government’s interest.” As such, it announced that most of the IRS’s Criminal Investigation division remains working during the shutdown.
The IRS also announced that it will not send out new liens, which it typically places on an individuals’ property to ensure he or she pays the amount ordered by the tax agency. Those who receive notice of a lien or levy before the government shutdown ends may be able to safely ignore those mailings for the time being, as the agency says that such notices were sent before the mass furloughs. Of course, individuals in such a position should speak with a tax law attorney to determine the best course of action.
At worst, the shutdown provides Texas residents with delinquent taxes with additional time to pay their ordered sum or formulate a legal defense. In some cases, such individuals can claim uncollectible status or innocent spouse relief, effectively freeing them of their obligations.
Reuters, “REFILE-Good news for tax delinquents: shutdown halts new asset seizures -IRS” Patrick Temple-West, Oct. 04, 2013