The Legal Play Blog

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One of the most common issues taxpayers face is knowing what can IRS collectors do and how to react. For instance, if an individual receives word that the Internal Revenue Service is coming after them for an amount owed, there are revenue officers who will then try to collect that assessment. But what happens next? Do you have to pay the assessment, or do you have options? What do you tell the IRS and how much do you tell them to obtain those options?

The best way to navigate this type of situation is to consult with a reputable tax attorney with experience in dealing with the IRS.

I Owe the IRS, What Can They Do?

If an assessment has already been made and revenue collectors are actively trying to collect, the individual has a couple of options:

1. This is generally not a recommended course of action. If the IRS knows where the taxpayer is living and the person is not planning to move, it is best to just face the agency.
2. Face the IRS. This government agency has power and will pursue the individual to get some sort of payment in return, though the exact amount depends on many different factors.

The Internal Revenue Service can get the information they need and choose to pursue the individual in one or more of the following ways:

1. Summons account information from banks
2. Put a lien on a person’s house and/or property
3. Foreclose on a person’s house and/or property

It is a common misconception to think that the IRS cannot get to bank or other financial account information. If a person refuses to give the IRS the information they are requesting, the agency can still get it through the bank or other institutions. The IRS may also use summons enforcement, in which case someone in the justice department can take the case and advise you in writing to hand over the information or they will take you to federal court.

 

Understanding How the IRS Views Property and Equity

After an assessment, the IRS will want to know how much the individual can pay. This is where it is helpful to know what IRS collectors can do and how to react.

There may be some debts the person will have to pay, even though it may be painful and take an extensive amount of time. In this case, installment agreements may be negotiated. If installment payments are the route the IRS agrees to and the individual takes, part of the value the IRS will ask for monthly is the value of the house and equity.

For example, if a person owes the IRS $5 million dollars and they make $80,000 a year and have $300,000 equity in the house, they probably can’t pay the $5 million. However, they could still afford to pay some. It is possible the IRS might declare the individual owes $20,000 a year for 5 years and must pay the $300,000. In total, that amount comes to $400,000. The value of a house is an important element in this case.

It is worth noting that although Texas is a community property state which sees husband and wife as joint owners of the whole property, meaning there would be a 50/50 split in equity, that is not how the IRS sees it. There is no division unless a previous legal document is in place stating such.

It is possible for a person to be close to retirement and have no income coming in. However, the IRS will still see value in the personal residence or homestead. In this instance, the property is viewed as the person’s main asset, so they must disclose the value of the property. The IRS will then likely put a lien on the property, and it will have the same effect as a judgement. The house cannot be sold with a title policy that says the house is free and clear of liens without first paying the amount owed to the IRS or getting the IRS to release it.

Before the IRS files a lien against their property, the individual could choose to work with the IRS to avoid it by making installment payments. As a general rule, the IRS is reluctant to enter into such agreements because it can compromise their position in regard to whatever equity is in the property. For instance, if the property is sold, it may diminish the IRS’ equity position. For this reason, the taxpayer is not typically able to enter into a compromise or installment plan without putting a lien on the house.

Many people faced with IRS assessments are already settled in their homes. Despite the IRS seeing value in the house, the owners cannot just sell it, or they would be homeless without anywhere to go. It is for this reason that the IRS can be negotiated with. An individual who can’t pay the IRS should not expect to compromise the amount owed or to be left alone by the IRS if they have some serious equity in their home. But the IRS must go through an extra process to foreclose upon someone’s principal residence. It doesn’t happen very often, although it can. If a home is worth $500,000 and has a $400,000 mortgage, the IRS will probably not take the home, but will instead say if the individual comes up with $400,000 in payments, they will likely release the lien because it is eighty percent of the equity.

Should a person die while in their home, and the IRS has an active lien on that property, the decedent’s probated estate is still obligated to pay what is owed to the IRS. There is no getting out of paying taxes, even after death. It is even possible that the children of the deceased could move into the house, and the IRS may still try to foreclose on the house and collect the lien.

There is light at the end of the tunnel regarding tax liens, and that is that they only have a 10-year life. Once a tax lien hits ten years, the IRS has to renew the lien to continue it. Sometimes they will not do this for people who have only modest houses and modest amounts of taxes due. If an individual falls into this category and is not in a hurry to sell/relocate and their debt is not big enough for the IRS to go after, they could try outlasting the 10-year lien. Yet, this will not keep the IRS from evaluating bank accounts and using other collection techniques to obtain assets of value.

 

The IRS Is Coming After Me. How Should I React?

If the IRS has assessed you for taxes owed and is actively pursuing payment, before deciding how to react, do not think you can get out of your debt. The goal shifts to figuring out how little you can pay without getting into serious trouble, and how long you can stay out of trouble with this arrangement.

The more money you owe, the more likely the IRS will persist. The more times you have been in the hole, so to speak, the IRS will persist and offer less flexibility.

When it comes to how you should react when the IRS pursues you, take the following into consideration:

• React proactively
• Do not ignore them
• Give the IRS information, but don’t be in too big of a hurry to do it and give them only the information they ask for (the exception to this rule is if you have a child with special needs or yourself or your spouse has some sort of excessive medical needs, in which case you should consult an attorney for proper timing in releasing that information)
• Get solid professional advice and heed it

If the above still leaves you feeling unsure of how to proceed, it is a wise idea to seek legal counsel. You are allowed to tell the IRS you need to consult with your attorney before responding to their questions. This enables lawyers to interact with the IRS on your behalf.

Hiring a professional and reputable tax attorney is highly recommended if an individual is being pursued by the IRS and is not sure of what to say or is afraid they might say something wrong. The best option may be to say nothing at all and let your legal representation speak for you.

 

Knowing what IRS collectors can do and how to react can be immensely helpful. However, there are situations in which enlisting the help of a professional tax attorney with IRS experience may still be advised to advocate for and protect a person’s rights.

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If you have ever found yourself wishing you could find some extra money, Texas unclaimed property is somewhere you should start your search. Essentially, Texas unclaimed property is exactly what it sounds like – there is some kind of property in Texas that is unclaimed. Usually it’s in monetary form, and comes from things like insurance premium refunds, utility deposits that were never returned, leftover money in bank accounts, and even unpaid wages. The funds may be owed to you directly, or as a beneficiary of a decedent who never claimed the property in their lifetime.

It is not uncommon for Texas residents to have an item or two of unclaimed property in the system, and the process to claim it may be as simple as typing in your name and address.. Believe it or not, it is as easy as it sounds. It’s just a simple search, and it’s free. What have you got to lose?

How to Determine if You Have Unclaimed Property in Texas

For many Texans, this unclaimed property consists of money they did not even realize they were owed. For this reason, we recommend searching for your name as well as that of both living and deceased loved ones to see if they have anything in the system to be claimed.

Here are the steps you can take to access the website:

1. Go to https://www.claimittexas.gov. Take care to ensure you are looking at a site from Texas Comptroller as there are some deceitful sites that will try to collect your information and have you pay a third party. Please note that the real website does not require you to pay any fees.
2. Type your last name or business name along with your first name into the box titled Claiming Property. Then hit search.
3. If the search results show an available claim for the name searched, you can click on it and follow the prompts to find out the next steps.

If the search reveals a rather large amount that is available to be claimed, or the property belongs to a loved one who has passed away and you do not possess letters testamentary, it can be wise to enlist the help of a reputable attorney to ensure that you are indeed able to claim it with minimal issues.

 

A Case Study:  Finding Three Hundred Dollars

A woman recently found the website and ran her own name and those of her family members through its search engine. She was shocked to discover that her niece had an unclaimed check from an insurance company for more than $300. How could this happen?

As it turns out, the niece had moved before the insurance company sent the check and the check was never forwarded to her new address. In the end, the check landed in Texas unclaimed property.

The woman let her niece know about the unclaimed property immediately and shared the steps to follow,  and the niece was able to claim her $300 dollars.

 

What To Know When Searching for Property of Your Deceased Loved Ones

What if the claim is in the name of a deceased loved one? Texas unclaimed property searchers should also be aware of the necessary procedures to access those funds. In some instances, our attorneys have found as much as ten thousand dollars or more in Texas unclaimed property for deceased individuals. In this case, if you are a current executor and you have the letters of testamentary, then you can go onto this website and apply to get the money to put into the decedent’s estate.

However, if there was no will or it was never probated, you will require an attorney to assist you to access the unclaimed money. It can be done but typically requires an attorney’s legal expertise.

In other words, if it is within four years and you possess the letters testamentary, you are on the right track. If it is outside of the four years and you are missing those letters of testamentary, there will be extra steps that will likely involve the help of an attorney.

 

A Case Study: Trusts, Wills, and Texas Unclaimed Property

One client found Texas unclaimed property past the four-year period. The deceased’s will was never probated because that individual intended her assets to go straight into a trust and avoid the probate process altogether.

The deceased specifically included a preamble in their will about a trust they had previously set up so their beneficiaries did not have to go through probate. However, the deceased never dreamed they would have Texas unclaimed property that would require letters testamentary. When one of the beneficiaries found the property, they sought the help of an attorney who is doing a muniment of title to transfer it to the trust, as this was exactly what the deceased indicated she wanted done in her will.

 

If you have questions about Texas unclaimed property such as where to look for it, what to do if you find it, or how to proceed on behalf of the deceased, contact a reputable attorney today to ensure you are able to claim what is rightfully yours.

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The birth of a business is characterized by a sense of positivity. Often little thought is given to setting the parameters for a potential battle for control of the company if disagreements between owners begin to cause an impasse. Having a vague business agreement can lead to substantial legal problems, not only for the owners, but for the business itself.

Fortunately, by working with a qualified attorney when forming the company, new business owners can flesh out a comprehensive business agreement that includes the protocol for the unthinkable. If certain events should occur, a well-planned business agreement will protect all involved.

The “Bright Side” of Partnerships

The majority of people who engage in business partnerships do so with the understanding that they are able to work well together. Initially, they are confident enough in each other to share a fifty-fifty ownership of the company without requiring anything more than a standard template.

We often hear budding entrepreneurs claim that a comprehensive business agreement is not needed. The most common reasons are:

• “We wholeheartedly believe we will do very well.”
• “We are going to make lots of money with our company.”
• “We are of like mind and always agree with one another.”
• “We have total belief in the business’ mission.”
• “Even if there turns out to be something that causes us to dissolve the company, we will just split everything fifty-fifty.”

The bright side of partnerships can be beautiful, but it seldom stays that way when problems arise.

 

Acknowledging Both Success and Failure Can Cause Problems

Most business owners mistakenly believe that only failure will bring problems to a company and its ownership, but the reality is that success can be equally responsible for demise in a partnership.

When there is some sort of failure within the company, these are some of the forms it can take:

• If one party doesn’t have any money, they may want the other one to put up the money instead.
• It may be viewed as unfair if one partner puts in money, but the other one does not want to.
• If one party brings in a contact base of family and friends and the other party does not, it can be seen as lopsided effort.
• If there are liabilities, one partner may want to force the other one to pay.
• If a pay cut is required, one partner could demand the other take it while they themselves do not.

Success of the business can also create problems in the partnership, and this typically takes forms in three primary ways:

1. One partner wants to sell out due to their current success, but the other does not.
2. One party may embrace success and want to take it easy, while the other prefers to keep their workload the same or even increase it.
3. With funds from new success, the partners may disagree on whether they take on more debt or pay off the debt they have.

In addition to failures and successes, life in general can bring up issues for the partners. For example, one partner may become older or not healthy and want out. Death of one of the partners can also bring about issues with the deceased’s estate and the partnership.

In the end, whether it is due to failure, success, or life, various circumstances can cause partners to be on different pages with how to run the business. Theoretically, most partners think they can just split up the business if they decide to go their separate ways, but it is far more complicated than this, and it often leads to a battle for control of the company.

 

What the Battle for Control of the Company Can Look Like

When two partners are at odds, the battle for control can look quite different depending on the specific details, or lack thereof, in the initial business agreement.

In general, when there are two partners who are not working well together anymore but their partnership agreement is silent as to what should happen in this event, one of three things takes place:

1. Both partners simply live with it and just continue on.
2. The partners decide to go their separate ways and sit down to negotiate a settlement regarding that decision.
3. They are forced to hire lawyers, file lawsuits, and have receivers appointed.

Before the partners decide which of the three pathways they want to choose going forward, the best thing to do is keep the lines of communication open to discuss what each of them wants to do and where they want to get in the process.

 

Potential Stumbling Blocks to Ending a Partnership

In the battle for control of the company, there are a few stumbling blocks that can play a large role in which of the above three ways they choose to move forward.

• Customer-base. The partners may fight over who gets the business’ customers once the partnership is dissolved.
• Manner of division. Some partners choose to split the business into parts and award some to each partner. However, this can be tricky because they could have an emotional or monetary attachment to the business they have helped build. This then necessitates a buyout agreement.
• Most businesses are financed by some sort of loan, and banks will require guarantees. Problems can arise if the exiting partner wants to be released from the personal liability with the loan since they are not there actively running the business and are not involved in the company and its line of credit.
• If things have grown so bad that the partnership has become adversarial and the partners cannot work it out themselves, professional lawyers, accountants, and appraisers will need to be brought in to value items and see what a buyout would require. Some businesses have just a desk, phone, and services. Other businesses might have a warehouse, inventory, storage yards, office buildings, and many other assets. The more assets and debts there are, the more complicated the situation becomes.
• Non-competes. This can be the biggest point of contention in buyouts as one partner typically does not want the other to be competing against them after they exit the partnership.
• Complete deadlock. This is when the partners absolutely cannot agree, and the business cannot operate without an agreement. A court may then be empowered to appoint a receiver who will take over the business. This is not efficient nor cost-friendly for the business or partners, so receivership is usually recommended only when the other sole option is to shut down the company completely.

 

Do I Need an Attorney to End My Business Partnership?

In the simplest of situations that have no external factors such as bank lending and liens, a lawyer’s help may not be required when ending a business partnership. Yet, if a complication exists like one partner buying another out or noncompete issues, these types of situations do require the experience of a knowledgeable attorney.

It is a mistake to wait until a problem develops to enlist the help of an attorney. Before going into the partnership, a lawyer can help owners proactively consider and determine factors such as determining buyout agreements for potential disputes, the division of the company if needed, who gets bought out, how much is paid in the buyout, what process will guide a buyout, the time period of the buyout, and non-competes.

 

When it comes to the battle for control of the company, the main takeaway should be to do as much as possible up front by having a lawyer present in the beginning to walk both partners through things they may not dream will happening and plan well for them. . . just in case.