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Shutdown could prove tough for those facing tax levies

For the last couple of weeks, we've been focusing our attention on the effects the government shutdown is having on taxpayers.

For taxpayers who may be facing the dread of an Internal Revenue Service audit, the shutdown has likely provided a bit of a cushion against the stress, temporary as it might be. As we noted last week, taxpayers who took advantage of the six-month extension on filing income tax returns still have a deadline of tomorrow to get those returns in.

There's yet one other group of taxpayers who may be facing particularly dire situations because of tax controversies that arose in the midst of the government's furlough action. These are individuals who may have become subjects of tax levies. 

When the IRS first announced its contingency plans for the shutdown, the staffing of the National Taxpayer Advocate Office was slated to remain open. The rationale was that the unit could be essential to protecting some Americans from imminent threat to life or property because workers could allow access to accounts that are frozen under a lien or a levy in cases of possible medical emergency. But when the axe finally fell, the IRS' general counsel said the staff was not essential.

Under the law, those receiving word of a levy against assets typically have 21 days to contact the IRS to address the matter. They can seek to challenge the levy, work out a plan for paying the amount, or plead humanitarian need to have funds released. After that, the bank is obligated to hand over the funds. The process requires someone to be on the IRS end of the line, however, and right now there isn't anyone.

Based on IRS averages, it's estimated that tens of thousands of taxpayers likely had money frozen in the days just before and since the official shutdown took effect. And the automated tax collection machinery hasn't stopped churning. Notices declaring intent to seize property and demanding immediate action are still going out.

In a circumstance as this, even an attorney may not be able to help at this moment. But it is still wise to consult one about possible options. 

Source: Forbes.com, "As IRS Shutdown Drags On, Some Taxpayers Face Big Problems," Janet Novack, Oct. 10, 2013

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