What Is a FIRPTA Withholding Certificate? 

When Should You Request a FIRPTA Withholding Certificate?

A withholding certificate allows the buyer to withhold a reduced amount from a property disposition subject to the terms of FIRPTA. Normally, when someone purchases a property from a non-resident alien or a foreign entity, they must withhold 15% of the realized amount and send it to the IRS. 

If they have a withholding certificate, they withhold nothing or a lesser amount. Applying for a withholding certificate can be complicated. To help you out, this guide explains when to apply for a withholding certificate and how to fill out the application. 

When Does the IRS Issue FIRTPA Withholding Certificates?

The IRS issues FIRPTA withholding certificates in the following situations:

1. When the amount that should be withheld is more than the seller's maximum tax liability. 
2. When reducing the withholding does not impede the IRS's ability to collect the tax from the seller. 
3. When the seller is exempt from U.S. tax on the gain realized from the transfer.
4. When the transferor or transferee agrees to pay the tax and provides a security to cover the outstanding liability.

The application process varies based on why you're applying. You can find detailed instructions in the following sections. 

Who Should Request a FIRPTA Withholding Certificate?

The transferee (buyer), their agent, or the transferor (seller) can request a withholding certificate. If the seller applies for a withholding certificate, they must alert the buyer in writing on the day of or the day prior to the transfer.

How to Apply for a FIRPTA Withholding Certificate

When you apply for a FIRPTA withholding certificate, you need to choose from one of six categories to explain why you're applying, and the application process varies based on which category you select. Here are the six options:

1. Transfers exempt from income tax or entitled to non-recognition treatment. 
2. Withholding based on the seller's maximum tax liability.
3. Installment sale rules.
4. Agreement to cover the tax payment with a security.
5. Request for a blanket FIRPTA withholding certificate. 
6. Other basis or criteria. 

If you're applying for a FIRPTA withholding certificate for reasons one, two, or three, you should file Form 8288-B (Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests). 

How to Fill Out Form 8288-B

This form requires the following details:

• Name and contact details of the transferor and transferee.
• Whether the applicant is the transferor or transferee.
• The name of the withholding agent – that's generally the buyer.
• Address where you want the withholding certificate sent.
• A description of the property.
• The date of the transfer.
• How the property is being used.
• If a U.S. income tax return related to the property was filed in the last three years.
• The amount of any U.S. taxes paid during the last three years.
• Why the withholding certificate should be issued — Again, when using Form 8288-B, the options include 1) exemption from U.S. tax or non-recognition treatment. 2) maximum tax liability less than the withholding amount, or 3) installment sale rules.
• If the transferor has any outstanding withholding from a similar transaction. 

Then, you need to note if the application was related to section 1445(e) 1, 2, 3, 5, or 6. 

Section 1445(e) Rules for FIRPTA Withholding Certificates

U.S. Code 1445(e) notes special situations related to U.S. real property distributions by corporations, partnerships, trusts, and estates. If your transaction does not involve any of these entities, it is not subject to the Code 1445(e) rules. 

If one of these entities is involved, you need to note if any of the following apply and then follow the applicable rules. Form 8288-B has boxes you can tick to indicate if your transaction is subject to these rules. 

1. Domestic partnerships, trusts, and estates must withhold 20% or the highest tax in effect for the tax year based on the portion of the gain realized by a non-resident alien. For example, if 15% of a domestic partnership's realized gain is allocated to a non-resident alien, the partnership should multiply 15% by the total realized gain and then withhold 20% of that number. 
2. Foreign corporations should withhold a tax based on the highest rate in effect for the year when they realize a gain from a U.S. real property distribution.
3. When domestic corporations distribute property to non-resident aliens, they should withhold 15% of the amount realized by the foreign shareholder. This rule only applies if the domestic corporation holds or has held U.S. real property during an applicable period of time.
4. The transferee (buyer/recipient) should withhold 15% of the realized amount if they receive a disposition of a partnership interest or a beneficial interest in a trust or estate. 
5. If a regulated investment company or a real estate investment trust (REIT) makes a distribution based on a realized gain in U.S. real property to a non-resident alien or a foreign corporation, the investment company or REIT should withhold 20% or the highest tax rate for that year. 

These are pared-down descriptions of the legal code. To ensure you are following the applicable rules for your situation, you should consult with a tax pro experienced with FIRPTA. 

How to Apply for FIRPTA Without Form 8288-B

To apply based on reasons four, five, or, six, you do not file Form 8288-B. Instead, you need to provide a written application, and the information needs to be labeled with the following letters and numbers. 

1. Info about why you're applying
   1. Whether you're applying based on category four, five, or six.
   2. If applying based on category four, (i) note if the agreement covers A) the transferor (seller's) maximum tax liability or B) the amount that would have otherwise been withheld (ii) note if the agreement and security instrument conform to the standard formats.
2. Details about the transferee (buyer) and transferor (seller)
   1. Name, address, and tax identification number of the person applying for the withholding certificate.
   2. If the applicant is the transferor (seller) or transferee (buyer).
3. Details about the property.
   1. Type of interest — for example, interest in real property, interest in personal property associated with real property, or interest in a domestic U.S. real property holding corporation. 
   2. Contract price.
   3. Date of the transfer.
   4. If the interest is in real property, the location and a description.
   5. Class or type and amount if the interest is in a U.S. real property holding corporation.
   6. Details about the following over the last three preceding tax years 1) Whether or not U.S. tax returns were filed related to the U.S. real property interest. If so, where the returns were filed. If not, why the returns weren't filed. 2) Amount of any U.S. income taxes paid related to the U.S. real property interest.
4. Information about why the withholding certificate should be issued. 

Then, you must also include additional information based on the category under which you're applying. 

Category Four (Agreement to Cover the FIRPTA Tax With a Security)

Include an explanation of the transferor's maximum tax liability or the amount to be withheld, a signed copy of the proposed agreement, and a copy of the security instrument you want to use. You can use a bond with surety or guarantor, a bond with collateral, or a letter of credit. Corporate transformers can use a guarantee. The IRS may accept alternative securities at its discretion.

Category Five (Request for Blanket FIRPTA Withholding Certificate)

A blanket FIRPTA withholding certificate applies to all of the transferors' property dispositions over the next 12 months. The applicant must provide an irrevocable letter of credit or a guarantee and enter into a tax payment and security agreement with the IRS. 

Category Six (Other Reasons for Requesting a Withholding Certificate)

You can apply under category six if you're using a non-conforming security. In this case, follow the instructions for category four, and then, describe the security and explain how it protects the government's interest. If you're using category six for any other reason, you should explain why the withholding certificate is justified. 

Who Should Sign the Request for a FIRPTA Withholding Certificate?

Finally, you need to sign the application. Individuals can sign their own applications. If a corporation or partnership is requesting an application, a responsible officer or a general partner can sign. With trusts and estates, trustees, executors, or equivalent fiduciaries can sign. 

If an authorized agent signs the application, you also must submit Form 2848 (Power of Attorney and Declaration of Representative). 

If you include information provided by another party, you should also include a written and signed verification from them that the information is correct. 

Where to Mail Applications for FIRPTA Withholding Certificates

Send applications for FIRPTA withholding certificates to this address:

Ogden Service Center 
P.O. Box 409101 
Ogden, UT 84409

How to Make Changes to a FIRPTA Withholding Certificate Application

You can amend a withholding certificate application by sending a statement to the address where you submitted your application. The IRS doesn't require you to follow a specific format, but you should include the following details:

• Name, address, and tax ID of the person making the amendment.
• Whether the person is the transferor (seller) or transferee (buyer).
• Date of the original withholding certificate application. 
• Description of the real property.
• Reason for requesting an amendment.
• Description of changes in the facts presented in the original application. 
• Signature.

When you submit an amendment, the IRS gets an additional 30 days to respond to your original application. In cases of significant changes, the IRS has 60 extra days. If the withholding certificate has been approved but not mailed back to the applicant, the IRS has 90 days. 

Requesting a FIRPTA Withholding Certificate to Buy Time

If the IRS believes that you have applied for a withholding certificate to buy extra time to submit the withholding, the transferee (buyer) will incur interest and penalties. Penalties and interest will accrue from the 21st date after the date of transfer until the payment is made. 

How to Request a FIRPTA Withholding Certificate If You Live Overseas

If you live overseas, you can request a withholding certificate using Form 8288-B as explained above. However, you should request to have the certificate mailed to the escrow or closing company. Note their information in Box 5 of this form. 

Applying for a FIRPTA Withholding Certificate Without a Tax ID

If the transferor (sell) or the transferee (buyer) does not have a tax identification number, they can request one when they apply for the FIRPTA withholding certificate. To request a tax ID, file Form W-7 (Application for IRS Individual Taxpayer Identification Number) with Form 8288-B. 

Then, mail the entire package to 

ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

The IRS typically takes 10 days to process requests for tax identification numbers. 

What to Expect After You Request a Certificate

The IRS normally responds to withholding certificate requests within 90 days of receiving the information. As indicated above, the processing time increases if you request an amendment to the application. 

How Long Does It Take to Request a FIRPTA Withholding Certificate?

The IRS estimates that it will take taxpayers 2 hours and 7 minutes to learn about the form and the FIRPTA law. Then, it estimates an additional 2 hours and 4 minutes to handle the recordkeeping. According to the IRS, it should take 1 hour and 7 minutes to prepare the form and 20 minutes to send the form to the IRS. 

The total time needed to apply for a FIRPTA withholding certificate should be about 5 hours and 38 minutes. Note that these are estimates and can vary widely depending on the situation. 

Get Help Requesting a FIRPTA Withholding Certificate

Applying for a FIRPTA withholding certificate can be a confusing process. But if you don't have the certificate, you will have to deal with withholding. In the absence of a withholding certificate, the buyer will have to withhold 15% of the seller's realized gain. As a result, the seller won't be able to receive all of the proceeds from the sale, potentially putting them into a financial bind.

You don't have to navigate this process on your own. Using TaxCure, you can search for local tax professionals who are experienced with FIRPTA requirements. Don't let FIRPTA rules hurt the success of your transaction — find help with FIRPTA today.

Cryptocurrency: Tax Implications of Selling, Exchanging, Holding, and Using Virtual Currency

Gains from cryptocurrency are taxed just like gains from any other property. There are tax consequences for selling, exchanging, and holding cryptocurrency as an investment. There are also tax implications of using cryptocurrency to pay for purchases or accepting virtual currency in exchange for goods or services. Failure to report crypto transactions on your tax return can lead to a variety of consequences. The IRS can assess penalties on your account, and the agency can even seize your crypto or other assets to cover your unpaid tax liability. 

If you have not reported cryptocurrency-related transactions correctly on your tax returns, you should try to get into compliance before the IRS contacts you. It's always better to reach out to the IRS proactively — especially if you're worried about potential criminal exposure due to tax fraud or evasion. The IRS recently added cryptocurrency to its Voluntary Disclosure Program. 

To help you out, this guide explains the tax implications of cryptocurrency in a variety of different situations. Then, it looks at what to do if you're behind on your reporting obligations.

How to Calculate Gain or Loss on Cryptocurrency

To calculate your gain or loss on cryptocurrency, subtract the basis of the cryptocurrency from its fair market value on the day you dispose of it. 

The basis is the fair market value of the crypto the day you received it plus any fees, commissions, or other acquisition costs. For example, if you purchase crypto for $900 and pay a fee of $100, your basis is $1,000. If someone gives you crypto worth $1,000, your basis is also $1,000.

When you dispose of the crypto, subtract the basis from its fair market value on the day of disposition. For instance, say you have crypto with a basis of $1,000 and you cash it out for $1,500 USD, you have a gain of $500. If you have crypto with a $1,000 basis and you sell it for $800, you have a loss of $200. 

Short- Versus Long-Term Cryptocurrency Gains and Losses

Long-term capital gains apply when you have owned the cryptocurrency for over a year. If you owned the crypto for less than a year, you incur short-term gains. The holding period starts the day after you acquire the crypto and ends the day you dispose of it. 

For example, if you receive virtual currency on Jan 1, 2021, and sell it during 2021, you have a short-term gain or loss. If you dispose of it on or after Jan 2, 2022, you have a long-term gain or loss. 

Short and Long-Term Capital Gains Rates on Cryptocurrency

Short-term gains are taxed at the same rate as your income. As of 2022, the rate can be anywhere from 10 to 37%. For most people, the long-term capital gains rate is lower than the short-term rate. 

As of 2022, the long-term capital gains rate is 0% if you're single with taxable income between $0 and $41,675, 15% if you're single with income between $41,676 and $459,750, and 20% if your income is over that threshold. The income brackets double for married couples filing jointly. 

When Do Capital Gains Apply for Cryptocurrency?

Capital gains don't just apply when you purchase and hold crypto as an investment. They can apply any time you acquire crypto and it grows or shrinks in value. 

For instance, if someone gives you crypto as a gift, and by the time you spend it, it has appreciated in value, you have a capital gain. However, if it had decreased in value, you would have a loss that you could use to offset your taxable gains. 

Receiving Virtual Currency for Goods or Services

If you receive virtual currency for goods or services, you must report the crypto as income. Use the fair market value of the cryptocurrency on the day you receive it. For example, say that you do web design for someone and they pay you with crypto worth $3,000. You must note $3,000 as income on your tax return. 

Because this is business income, you also get to subtract expenses from your income. That rule applies whether you pay for the expenses using U.S. currency, cryptocurrency, or anything else. 

To continue with the above example, imagine that while working on this project, you spend $100 USD on supplies but you also use $300 worth of cryptocurrency to buy software. You have $400 of business expenses which you can deduct from your business income. 

However, if the crypto you spent changed in value while you owned it, you may have an additional tax consequence as explained below. 

Paying for Services With Virtual Currency

When you pay for services with cryptocurrency, your gain or loss is the difference between the fair market value of the services and the adjusted basis of the cryptocurrency. 

Here's an example to illustrate this concept. Imagine that Joan receives $500 worth of cryptocurrency on March 1, 2021. On June 2, 2022, she uses all of this crypto to pay an accountant to do her tax return. The fair market value of the accountant's services was $800.

Joan's basis is $500. The fair market value of the services is $800. Her capital gain is $300. Because she had the crypto for more than a year, she has a long-term capital gain, and she needs to report this gain on her tax return. 

But now, let's say that Joan was paying the accountant to do her business taxes. Now, she has two tax-related events. She must report the $300 in capital gains, but she can also report the $800 accounting bill as a business expense. 

Selling or Exchanging Property for Virtual Currency

If you sell property for crypto, you calculate your gain or loss by subtracting the basis of the property from the fair market value of the crypto. For instance, say you own a building with a basis of $100,000 and you sell it for $150,000 of cryptocurrency, you have a $50,000 gain. 

When doing these calculations, you should use the fair market value of the crypto. But in situations where you cannot find the fair market value of the virtual currency, you should use the fair market value of the property. 

Crypto, Forks, and Airdrops

A fork is a change to the rules governing the blockchain that created the cryptocurrency. The chain splits at the fork, creating a new set of blockchain with the same history of the original cryptocurrency but moving in a new direction. Here are the tax implications of crypto forks.

Soft Forks Versus Hard Forks

Soft forks add new security features or functions to the crypto but don't create any new currency. As a result, you don't receive any income and you don't have to report anything on your tax return. Hard forks, in contrast, feature drastic code changes that create a new version of cryptocurrency and may come with tax implications as outlined below.

Hard Fork, Airdrop, and New Currency

If you receive new cryptocurrency through an airdrop following a hard fork, you have taxable income. But if a hard fork occurs and you don't receive any new currency, you don't have taxable income. An airdrop is a distribution of cryptocurrency to a taxpayer's ledger address. 

You should report ordinary income equal to the fair market value of the crypto the day you received it. If you eventually sell the crypto or use it to buy goods or services, you will need to calculate a gain or loss as explained above. Use the fair market value of the crypto the day you received it as your basis. 

Here's an example. Say that you have crypto worth $1000. A hard fork occurs and you receive new crypto worth $200. You must report $200 as ordinary income. A couple of years later, you exchange the crypto received in the airdrop for $500 USD, you now must report a capital gain of $300. 

Taxation on Gifts of Cryptocurrency

Gifts are not taxed. But to avoid taxation, the crypto must be given to you as a bonafide gift. For example, if your grandma gives you $1,000 of virtual currency as a birthday present, that is a bonafide gift with no tax consequences. 

In contrast, if your boss gives you $1,000 of crypto after you complete a bunch of work and says it's a gift, the IRS isn't likely to see that as a gift. In this case, you have received income and you must report it as such. 

Although there are no taxes for receiving gifts, you may face taxes when you sell, exchange, or dispose of the cryptocurrency. At that point, you should use the fair market value of the currency on the day you received it as the basis. Here are a few examples of what happens when you use gifted cryptocurrency. 

Tax Implications of Spending Gifted Cryptocurrency

Say that grandma gives you $1,000 of cryptocurrency. A year and a half later, you use the crypto to purchase $1,500 of services. You now have a $500 long-term capital gain. That is the difference between the value of the crypto the day you received it and the value the day you disposed of it. 

Tax Implications of Exchanging Gifted Crypto for US Currency

The math is basically the same if you exchange the gifted crypto for US dollars. Imagine that a couple of years after receiving the $1,000 virtual currency gift that you exchanged it for $2,500 USD. Now, you have a gain of $1,500. 

But what happens if you turn the crypto into USD the very day that grandma gives it to you? If it hasn't changed in value, you don't have a taxable gain or loss, and by extension, you don't have to report anything on your tax return. 

Tax Implications of Regifting Cryptocurrency You Received as a Gift

But what if you decided to give away the crypto? Again, you don't have to pay taxes on bonafide gifts. Say that you give grandma's $1,000 gift of crypto to your favorite nephew when it is worth $1,500. 

You don't have a taxable event, and your nephew now has crypto with a basis of $1,500. Note, however, that as of 2022, if you give away more than $16,000 to a single person, you must file a gift tax return.

Tax Rules for Donating Cryptocurrency

When you donate cryptocurrency to a charity, you receive two distinct tax advantages:

1. You don't have to report any gains on the crypto.
2. You get to claim a charitable deduction on your tax return. 

To qualify for this tax treatment, you must donate the crypto to a qualifying charitable organization. You should file Form 8283 (Noncash Charitable Contributions) if your total deduction for charitable donations exceeds $500. Here are details on how to calculate the value of your deduction.

Charitable Deduction for Donating Crypto Held Over a Year

If you have held the crypto for more than a year, your deduction is the fair market value of the crypto on the day you donate it.

For example, say that you purchased crypto two years ago for $1,000. Now it's worth $2,000 and you donate it to a qualifying charity. Your charitable deduction is $2,000. 

Although the crypto increased in value, you don't have to report or pay tax on the capital gain. 

Charitable Deduction for Donating Crypto Held Over a Year 

If you have held the crypto for a year or less, your deduction is the lesser of the basis or the fair market value on the day of the donation. Take a look at these examples.

Imagine that you purchased crypto for $1,000 and six months later, it is worth $1,500. If you donate the crypto to a qualifying charity, your deduction is $1,000 (you use the basis because it's the lowest number). 

In this case, it would actually be more financially advantageous to sell the crypto for $1,500 and pay tax on the $500 gain. Then, you can donate $1,000 to charity, claim the $1,000 deduction, and pocket the rest. Or, you can give all of the proceeds of the sale to the charity and take the corresponding deduction.

If the crypto fell in value and you donated it after holding it less than a year, the situation would be a little different. Say that you purchased crypto for $1,000 and six months later it was only worth $500. If you donate this crypto to charity, you can only claim a $500 deduction. 

In this case, you might be better off selling the crypto at a loss and using the loss to offset other gains on your tax return. If you like, you can still donate the $500 to charity once you've converted the crypto to cash.

Reporting Cryptocurrency Received as Charitable Contributions

Charities should report virtual currency contributions on Form 990 (Return of Organization Exempt From Income Tax) or Form 990-EZ (Short Form Return of Organization Exempt from Income Tax). Simply note the fair market value of the contribution along with your other contributions on line nine or line one of your respective return. 

If your charity sells, exchanges, or disposes of the virtual currency within three years after receiving it, you also need to file Form 8282 (Donee Information Return). You don't have to file this form if the donor signed Form 8283 to indicate that the donation was worth less than $500. 

Where to Report Cryptocurrency on Your Tax Return

By now, you have a sense of when crypto creates reportable income or capital gains, but you may still be wondering where to report cryptocurrency gains or losses on your tax return. Here is where you should report cryptocurrency based on the details of the transaction. 

• Crypto received as income but not for your business — Schedule 1 (Form 1040) (Additional Income and Adjustments to Income)
• Crypto received as revenue in your business — Schedule C (Form 1040) (Profit or Loss From Business)
• Crypto received as revenue for your farm/ranch business — Schedule F (Form 1040) (Profit or Loss From Farming)
• Crypto received as revenue for your partnership — Form 1065 (US Return of Partnership Income) 
• Crypto received as revenue for your S-corp — Form 1120-S (U.S. Income Tax Return for an S-Corp)
• Crypto received as revenue for your C-corporation — Form 1120 (U.S. Corporation Income Tax Return) 
• Crypto purchased, held, and sold as an investment — Form 8949 (Sales and Other Dispositions of Capital Assets)
• Crypto received for any reason that created a gain or loss when you disposed of it — Form 8949 (Sales and Other Dispositions of Capital Assets)

These are the most common places to report cryptocurrency on your tax return. But depending on the details of the transaction, you may need to report crypto in another spot. Consult with a tax professional if you need guidance. 

Cryptocurrency Question on Individual Tax Return

On Form 1040 (U.S. Individual Income Tax Return) there is a question that asks if you have received, sold, sent, exchanged, or acquired cryptocurrency during the year. You should answer yes to this question if you received cryptocurrency that is considered income, or if you disposed of cryptocurrency that created a gain or loss. 

However, if you just purchased cryptocurrency but you haven't had any other transactions, you can answer no to this question. Note that if you transfer crypto between your own accounts, that is a non-taxable event. Even if the exchange or platform sent you a tax document detailing the event, it's still not taxable. 

Crypto Assets and FBAR Reporting

If you have an aggregate balance of over $10,000 in foreign bank accounts, you must file a Report of Foreign Bank and Financial Accounts (FBAR). Here is an overview of the FBAR requirements so you can see if this rule affects you. 

At the time of writing, you are not required to include foreign accounts that only hold crypto assets on your FBAR. However, in early 2021, the Financial Crimes Enforcement Network (FinCEN) released a notice saying that it intends to request an update to the Bank Secrecy Act (BSA) which would require taxpayers to report these accounts. 

Be aware that the rules around cryptocurrency and FBAR are likely to change. Contact an accountant or other tax professional for guidance. 

What If You Forgot to Report Cryptocurrency Transactions on Your Tax Return?

As you can see, almost every crypto-related transaction has tax consequences. If you failed to report income or capital gains from crypto on your tax return, you underreported your income, and you may have a past-due tax liability. 

If the IRS finds out that you have income or gains from cryptocurrency, the agency can send you an assessment and a demand for payment. Plus, the IRS can add penalties and fees for underreporting your income. If you ignore the notices, the IRS can enforce collection actions such as penalties, federal tax liens, asset seizures, and even criminal charges in rare cases. In particular, the agency can seize your crypto as noted above. 

If you have unreported crypto losses, you may have missed out on valuable deductions and may have paid more income tax than you should have. In this situation, you may want to amend your returns to reclaim your overpaid tax liability. 

Get Help With Cryptocurrency and Taxes

If you have questions about how to report cryptocurrency on your tax return, if you haven't reported cryptocurrency correctly on your tax return, or if you have other issues related to crypto and taxes, you should reach out to a tax professional. 

Certified public accountants, enrolled agents, and tax attorneys can help you. Use TaxCure to find a local tax professional experienced with cryptocurrency issues today.

What Is FIRPTA?

Understanding FIRPTA Requirements and Exceptions

The Foreign Investment in Real Property Tax Act (FIRPTA) allows the IRS to tax non-resident aliens when they sell or dispose of U.S. real property. If you buy a home from a non-resident alien, you must withhold 15% of the proceeds and send it to the IRS. This deposit helps to ensure that the non-resident alien pays the tax. 

"Think of FIRPTA as an advance tax payment. If a foreign person sells their property at a profit, they earn U.S. sourced income, and they have to pay tax on that income. The FIRPTA deposit stays at the IRS until the seller submits a tax return. Then, if they owe less tax, they get a refund for the difference." 
— Marc Enzi, Enrolled Agent with Tax Solutions — Trusted Globally in Houston, Texas 

To help you understand FIRPTA requirements, this guide breaks down the essentials. 

Who Pays FIRPTA?

The seller owes the tax. They have earned capital gains on the sale of the property, and they are the ones who actually owe the tax. 

But the buyer must withhold the tax. If the buyer doesn't withhold the tax, they may incur penalties. Ultimately, if the buyer doesn't withhold the tax and the seller never pays it on their own, the buyer can become liable for the FIRPTA tax. 

How Does FIRPTA Apply to Buyers?

As the buyer, you must file Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests) within 20 days of the sale. This is a short one-page form. You need to include your name and address, a description of the property, and the date of transfer. Then, you should note the amount subject to withholding and the total amount withheld. 

For example, if $300,000 was subject to 15% withholding, you would withhold $45,000 and you would send this amount to the IRS. 

You also need to attach copies A and B of Form 8288-A (Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests). This form also requires very basic information about you, the seller, and the property. 

How Does FIRPTA Apply to Sellers?

After the buyer submits the FIRPTA withholding and documents, the IRS will send copy B of Form 8288-A to the seller. The seller will use that document when filing their U.S. income return. 

Non-resident aliens should file Form 1040-NR (U.S. Nonresident Alien Income Tax Return). At that point, if the amount withheld was more than the tax due, the seller will receive a refund. 

Note that the rules are different when corporations distribute U.S. real property interests to shareholders. Foreign corporations should withhold 21% of their recognized gain. Domestic corporations should withhold tax on the fair market value of U.S. real property interests distributed to foreign shareholders if the distributions are due to redemption of stock or liquidation of the corporation. 

When Does FIRPTA Apply?

FIRPTA applies to all dispositions of U.S. real property interests by foreign persons. To help you understand when FIRPTA applies, let's break down these concepts.

What Is a FIRPTA Disposition?

A disposition includes sales, exchanges, gifts, transfers, exchanges, and any other transfers of ownership. 

What Is Real Property Under FIRPTA?

U.S. real property interests include the following:

• Real estate such as homes or commercial buildings. 
• Interests in real property such as mines, wells, or natural deposits in the United States.
• Personal property associated with the use of real property — for example, farming machinery purchased with a farm.
• Interests in domestic corporations unless the corporation never held U.S. real property while the seller owned their interest or during the last five years.
• Rights to purchase U.S. real property — for instance, if a non-resident alien has an option to buy real property and they sell it.

How Does FIRPTA Define a Foreign Person or Entity?

For the purposes of FIRPTA, a foreign person refers to a non-resident alien. A non-resident alien is a resident of a foreign country who is not a U.S. citizen. 

Resident aliens, also called green card holders, are not considered foreign persons under the terms of this act. The category of foreign person also includes foreign partnerships, foreign trusts, foreign estates, and foreign corporations that have not elected to be treated as domestic corporations under Section 897(i). 

How to Calculate FIRPTA Withholding

FIRPTA withholding is based on the amount realized by the sale. To calculate this number, you should add together the cash paid, the fair market value of other transferred property, and the amount of any liability assumed by the buyer. 

For example, say that you buy a property for $200,000 cash, and you take over the seller's $150,000 loan. You also receive additional property worth $50,000. When you add these numbers together, you have the amount realized on the sale — in this example, it's $400,000. 

Then, you multiply this number by the withholding rate of 15%. In this scenario, you would need to withhold $60,000. As of 2022, you must withhold 15% of the amount realized on the sale (10% for sales before February 17, 2016). 

FIRPTA on Property Owned Jointly by U.S. and Foreign Persons

If the property is jointly owned by U.S. citizens or residents and non-resident aliens, you need to allocate the non-resident alien's realized amount to calculate your withholding. In other words, the FIRPTA withholding is only based on the portion of the property owned by the non-resident alien. 

Say the realized amount was $400,000, and the foreign person had a 20% interest. Their realized amount is $80,000 (20% of $400,000). You should base the withholding on that amount. 

This rule even applies if the non-resident alien is married to a U.S. citizen. You still have to allocate the realized amount based on the non-resident alien's interest in the property. 

Exceptions to FIRPTA

There are several exceptions to FIRPTA. You may not have to withhold FIRPTA if any of the following apply:

• The sales price is less than $300,000, and you plan to use the property as a personal residence. Review the following section for more details.
• The seller realizes nothing on the sale. 
• The seller provides a certificate stating that they are not a foreign person. 
• The seller provides a withholding certificate indicating that a reduced amount should be withheld. 
• The seller submits in writing that they are not required to recognize a capital gain on the house (for example, if the seller is allowed to take advantage of the capital gains exemption for a personal residence). 
• The buyer or acquirer is the U.S. government, a state, a possession, a political subdivision, or the District of Columbia. 
• The disposition is subject to rules related to corporate or partnership interests or the lapse of an option. 

FIRPTA Rules for Personal Residences

To meet the residential requirement, the buyer must plan to reside in the property for at least 50% of the days the property was used by any person during the first two years after the transfer. For instance, if the buyer rents out the property for 200 days, they must live there for at least 100 days to meet this requirement. 

The buyer can also satisfy the residential requirement by having their family members live in the home. Qualifying family members include spouses, full and half-siblings, ancestors, and direct descendants. You don't have to consider days when the property was empty. 

Note that the residential requirement is based on intent. If the buyer's plans change unexpectedly, the IRS can be flexible as long as the buyer couldn't reasonably foresee the change in circumstances. 

Reduced FIRPTA Withholding

As of 2022, FIRTPA withholding can be reduced to 10% if you're buying a home as a personal residence, and the realized gain is over $300,000 but less than $1 million. 

Note that if the residential property is owned jointly by a non-resident alien and a U.S. resident, you must take the total amount of the realized gain into account when determining if you're exempt from FIRPTA or facing a reduced amount. 

For example, say that you purchase a property for $800,000, and only $250,000 is allocated to the non-resident alien. In this case, you can reduce the FIRPTA withholding, but you are not exempt. 

Even though the amount realized by the non-resident alien was less than the $300,000 threshold noted above, the total amount is greater than $300,000. As a result, you have a reduced withholding requirement, not an exemption. 

FIRPTA Requirements on Exchanges of Real Property for Stock

FIRPTA withholding rules do not apply if the seller exchanges property for stock in a U.S. corporation, as long the exchange meets the following criteria:

• Gain or loss does not have to be recognized because the exchange meets the requirements of IRC 351.
• The real property was exchanged for another real property interest which would be subject to taxation when disposed of. 
• The non-resident alien provides notice to the withholding agent that the disposition is not subject to gain or loss under the IRS's rules. 
• The withholding agent sends the notice and a cover letter to the IRS within 20 days after the disposition. 

However, FIRPTA withholding is required if the non-resident alien exchanges the property for stock in a foreign corporation and the foreign corporation treats the property as paid-in capital or a contribution to capital. Foreign corporations are not required to withhold for FIRPTA if they have elected to be treated as U.S.corporations under IRC 897(i).

When Was FIRPTA Passed?

FIRPTA became law in 1980. Although this law has existed for over 40 years, many taxpayers are not aware of it. The law has also become relevant for more taxpayers in recent years due to an increase in foreign ownership of real property. 

According to the National Association of Realtors, foreign investors purchased $57.7 billion in U.S. commercial real estate in 2021. That was a 49% increase over the previous year, and this number doesn't even take residential real estate into account. 

When more foreign investors own U.S. property, U.S. buyers become more likely to purchase property from non-resident aliens. As a result, more taxpayers have to deal with FIRPTA than they did in the past. 

Why You Need a FIRPTA Expert

FIRTPA specialist Marc Enzi explains, "FIRPTA can kill deals at the closing table when there are misunderstandings and people don't know how to handle it. Sellers don't understand that it's a tax deposit and not a tax. 

"If FIRPTA is not handled properly at closing, sellers may have trouble getting their refunds, and buyers may get a big penalty from the IRS. Having a FIRPTA expert on your team before closing helps to avoid any problems after closing." 

Get Help With FIRPTA

The FIRPTA rules can be complicated and confusing, especially when corporations or partnerships are involved. Whether you're currently buying a property from a non-resident alien, worried that you didn't withhold the correct FIRPTA tax, or dealing with a FIRTA liability, a tax professional can help you. 

At TaxCure, we make it easy to search for quality tax professionals in your area who are experienced with FIRPTA. To learn more, search for a tax pro today.

What Is a New York Tax Warrant? How to Avoid and Remove Tax Warrants

If you don't pay your NY state taxes, the New York State Department of Taxation and Finance can take all kinds of collection actions against you. One of the first collection actions is a tax warrant. Tax warrants open the door to other types of enforcement actions, and they can make it difficult to buy or sell property and take out loans. 

Is the NY DTF threatening to issue a tax warrant due to your tax debt? Is there already a tax warrant against you? This guide explains state tax warrants and how to get them removed. 

What Is a NY State Tax Warrant?

A NY tax warrant is a lien against your assets. It secures the New York State Department's interest in your assets when you owe tax debts. Once a warrant is in place, the state can move forward with asset seizures and wage garnishments. If you sell assets while there is a NY State tax warrant against you, the state has the rights to the proceeds from the sale. 

New York State can issue tax warrants for unpaid state income tax, but the Department can also issue warrants for unpaid business taxes such as franchise tax, sales tax, and/or withholding tax. 
 

How Do NY State Tax Warrants Work?

The NY DTF files the tax warrant in the county where you live or do business as well as with the New York State Department of State. The liens attach to your assets, making it very difficult to get loans or sell property. 

To give you an example, imagine that you want to get a line of credit against the equity in your home. When the lender looks into your situation, they will see a tax warrant against you. This means that the state has a stake in your home. The bank won't loan you the money unless the state agrees to subordinate or remove the lien. 

Now, imagine that you decide to sell a vehicle for $25,000. You owe $5,000 on a car loan, and there is a $10,000 tax warrant against you. When you sell the vehicle, you don't get to pocket the $25,000. Instead, $5,000 automatically goes to the car loan lender and $10,000 goes to the state for the tax warrant. 

Beyond that, a tax warrant is the first step toward seizing your assets. Once the state issues the tax warrant, it has the right to move forward with asset seizures, bank account levies, and income executions (garnishments).

NYS Tax Warrant Vs NYS Tax Lien

NYS tax warrants and NYS tax liens are effectively the same things. Many states use the word lien, but the New York State Department of Taxation and Finance uses the term warrant. They both refer to a lien against your assets. They both secure the state's right to your assets or the proceeds of the sale if you sell your assets. 

NY Tax Warrant Vs IRS Tax Lien

Again, a tax warrant and a tax lien are the same things. They both do the same job. They secure the tax authority's interest in your assets. If you have $10,000 or more in tax debt, the IRS can issue a tax lien. The NY DTF doesn't publish a number for when the state will issue a tax warrant. It just says that if you don't resolve your tax debt in a timely fashion, the state can issue a tax warrant. 

An IRS tax lien stays in place for 10 years. The IRS generally cannot collect tax debts that have been assessed more than 10 years ago. In New York State, tax warrants last for 20 years. If you don't take action, the warrant will exist for two decades. 

IRS tax liens and NY tax warrants are both precursors to tax levies or asset seizures. Generally, the warrant or lien must be in place before the IRS or NY State can take your assets. However, if the IRS or NYS believes that the tax collection is in jeopardy, they may be able to move forward with a seizure without issuing a warrant/lien.

Can You Go to Jail for a Tax Warrant?

No, you will not go to jail if the NY DTF issues a tax warrant against you. A tax warrant is like a tax lien. It is not the same as a warrant for your arrest or a bench warrant. 

The word "warrant" refers to a document issued by a government authority to give the police or another body the right to carry out an action. For example, an arrest warrant is issued by the courts, and it gives the police the right to arrest you. Similarly, a tax warrant is issued by the NY DTF, and it gives the state a legal stake in your assets. 

This doesn't mean you should ignore a tax warrant. They are very serious. Again, once there is a tax warrant against you, the state can claim the proceeds when you sell an asset. It can also move forward with a seizure of your assets. But don't worry — you can't be arrested for a tax warrant. 

New York State Tax Lien Search

Tax warrants are public records. The NY DTF publishes a public database of tax warrants and updates it twice a week. If you want to see if there is a tax warrant against you, check out the NY State Tax Warrants search tool. You can search by your name, and you can also narrow down the search by the county where the warrant was filed, warrant ID number, docket amount, docket date, and type of tax. 

What If I Don't Resolve the Warranted Balance?

If you don't resolve the warranted balance, the tax warrant will continue to stay in place. As explained above, a tax warrant makes it very difficult and potentially impossible to get loans. It also means that the state will take the proceeds when you sell your assets. Even worse, the NY DTF can move forward with other collection actions, including taking your assets, seizing the funds in your bank account, or garnishing your paycheck. 

When Do New York State Tax Warrants Expire?

New York State Department of Taxation and Finance tax warrants stay in place for 20 years. During this 20-year period, your ability to sell or transfer assets or borrow money will be severely compromised.

How to Release a NYS Tax Warrant 

To get a New York State tax warrant release, you must pay the tax bill in full. If you set up a payment plan, the NY DTF won't pursue additional collection actions against you, but the warrant will stay in place until you have fully paid off your state tax bill. 

You may also be able to get the warrant released if the New York Department of Taxation filed it in error. You should contact a tax pro to help you. Once the tax has been paid, the NY DTF will notify the county clerk and the Department of State so they can remove the tax warrant from your records. 

What Is a Satisfaction of Judgment?

Once you pay off the New York State tax warrant, the DTF will issue a Satisfaction of Judgment to the county clerk. This shows that you have paid the tax liability. The state will also send you a copy. If you need a Satisfaction of Judgment letter before the state issues it, you can request a Notice of Pending Warrant Satisfaction if one of the following applies:

• You have given the NY DTF guaranteed funds (certified check, bank check, wire transfer, money order, or cash) for the full payment. 
• You have paid in full by credit card.
• You have made a payment that's posted in the NY DTF system, and you have proof that it has cleared your bank account. 

For example, if you're trying to take out a loan and you need to prove that you have taken care of this lien, you will need a Satisfaction of Judgment or Pending Warrant Satisfaction. Or, if you're trying to sell the property and you need to prove that it is not encumbered, you may also need one of these documents. 

Get Help With New York State Tax Warrants

Tax warrants can be financially devastating. They can create economic hardship. They can also lead to even worse involuntary collection actions. If you're dealing with a tax warrant, you need to reach out to a local New York tax pro. 

Using TaxCure, you can search for tax lawyers, CPAs, and enrolled agents in your area, and you can customize your search to ensure they have the experience you need. Then, review their profiles and give a tax pro a call. They'll talk with you about your state tax warrant and help you decide the best steps forward for your situation. TaxCure makes it easy to find the best New York tax resolution firm for your unique situation. 

You don't have to deal with the NY DTF on your own. You can get help from an experienced professional — contact a NY State tax pro today.

The Virginia Tax Refund Offset Program

What to Do If Virginia Tax Keeps Your Tax Refund

Were you expecting a refund from Virginia Tax? Did the state keep your refund? Wondering why the state kept your tax refund? Generally, this happens when you owe state back taxes, IRS back taxes, or debts to several other organizations. 

The process the state uses to claim tax refunds for unpaid debts is called the Virginia Tax Offset program. This guide provides an overview of the offset program, and it outlines options you can take if your refund has been offset.

What Does Virginia Tax Offset Mean?

Virginia Tax Offset is a program where Virginia Tax keeps your state tax refund to offset other bills you have. The agency can seize state tax refunds to cover unpaid state taxes, IRS back taxes, and debts from several different organizations.

There is also a federal refund offset program. For instance, if you owe state taxes but not IRS taxes, the IRS can keep your refund and send it to Virginia Tax to cover your tax bill. 

Who Can Take Your State Tax Refund in Virginia?

If you owe money to any of the following organizations, the Virginia Department of Taxation can seize your state tax refund:

• Virginia Tax
• Internal Revenue Service (IRS)
• The Department of Social Services
• Other Virginia state agencies and courts
• Local Virginia governments. 
• Some federal government agencies for non-tax debts

Virginia Tax will apply individual and business refunds to almost all of these debts. However, if you owe a non-tax debt to a federal government agency, the state can only offset individual income tax refunds, not business refunds. 

How Does Virginia Tax Offset Work?

When you file a state tax return that shows a refund, Virginia Tax runs your name and tax ID through a claims system. The system shows if you owe money to any of the organizations listed above. If you do, Virginia Tax reduces your tax refund by the amount that you owe. Then, the agency sends the offset amount to the relevant agency. 

If there's any money left, the rest goes to you. You can also get more information by checking out their website at tax.virginia.gov/offset. Or you could even call the Virginia state tax offset number at 804-367-2486. 

Is It Legal for VA to Keep My Refund?

Yes, it is legal for the state to keep your tax refund if you owe a debt to one of the agencies listed above. The federal law that outlines the legality of the US Treasury Offset Program is US Code 31: 3716. 

In Virginia, the Virginia Debt Collection Act makes offsets legal. You can read the exact law by checking out the VA Code 2.2-4800. 

How Do I Know That Virginia Is Going to Keep My Refund?

In some cases, you may receive a notice before the state seizes your refund. The notice may be called something like Notice of Intent to Offset State Tax Refund. However, the state doesn't necessarily need to notify you in advance. 

Generally, if Virginia Tax or the IRS plans to levy (seize) your assets, they must notify you a certain number of days before the seizure takes place. They also must notify you of your right to appeal. These rules don't apply to tax refunds. Tax refunds are one of the only assets that the state or the IRS can seize without much warning. 

If you owe a debt to one of the above agencies, there is a good chance that you won't receive your tax refund. If you're unsure how your debt will affect your refund, you may want to contact the agency directly. They may be able to answer your questions about the offset program. 

How to Contact the Virginia Department of Taxation About a Refund Offset

If your refund was claimed to cover a debt, you could contact the Virginia Department of Taxation with questions. Here are the contact details that you can use if you have offset questions:

• If the offset was for a Virginia state tax debt, call (804) 367-8045.
• If the offset was for an IRS tax debt, call the IRS at (800) 304-3107
• You can contact that agency directly if the offset was for any other agency. Simply do a web search for their number. 
• If the offset was for a federal non-tax debt and you need help contacting the agency, you can call the Treasury Offset Program (TOP) at (800) 304-3107 or (800) 877-8339 if you are hearing impaired. 

If you cannot get the answers you need, you may want to contact a tax attorney. They can explain what's happening, answer your question, and help you get your refund back if you didn't owe the debt. 

What to Do If You Don't Owe the Debt

What happens if you already paid the debt and the state still took your refund? If the bill was for an unpaid state tax debt, you should contact Virginia Tax directly. Be prepared to share information about when you made the payment, and gather proof if you have it. 

If the bill was for another agency, you need to contact them directly. If you already paid, they are in charge of refunding your claim. Unfortunately, you can't get a refund from Virginia tax if your tax refund was claimed to pay a debt from another agency. 

What If My Refund Was Claimed Due to My Spouse's Debt?

What if Virginia Tax keeps a tax refund to pay off a bill that was just due to your spouse? Typically, in this situation, you can reach out to the state and let them know that you are not responsible for the bill. To give you an example, imagine that your spouse owed child support or imagine that you owe back taxes from a business return filed before you were married. 

In these situations, Virginia Tax will only claim the portion of the refund that is due to the spouse with the debt. The agency will let the spouse without a debt receive their share of the refund. Generally, you have to reach out and request this option. 

Virginia Tax won't just split the tax refund in half. Typically, the state will look at how much of the refund is from the non-debt spouse. Then, it will send you that portion of the refund. 

Where Is My Virginia Tax Refund?

Wondering where your refund is? Worried that it's been seized for a debt? Just wondering if it's done being processed? You can look for information on your VA tax refund using the state's where's my refund tool. This can be found at https://www.tax.virginia.gov/wheres-my-refund.

Get Help With a Virginia Refund Offset

You can take all kinds of steps if you're worried about a VA tax offset. You can contact the agency you owe a debt to and try to make arrangements. Setting up a payment plan on your back taxes, for example, may allow you to avoid losing your tax refund. However, the rules vary. Alternatively, you may need to establish that the debt wasn't yours so that you can get back your refund. 

You should contact a tax professional to help regardless of your exact situation. They can answer your questions, explain more about how state tax refund offsets work, and help you find the best resolution for your situation.. 

To get quality help with Virginia tax issues, use TaxCure to search for a local tax professional in Virginia. You can narrow down the results to look for pros who have experience with the offset program. Then, you can read their profiles to find the perfect match for your needs. Don't let the state keep your tax refund — contact a VA tax pro today.

How Virginia Liens & Levies Work and How to Stop or Remove

If you have unpaid state taxes, Virginia Tax can issue a lien or levy against you. The Commonwealth of Virginia has the right to forcibly take your money and assets for unpaid state taxes. This guide to Virginia tax liens and levies explains how they work, what to expect, and how to stop or remove these collection actions. 

What Are Virginia Tax Liens?

In Virginia, a tax lien is when the state takes your assets to cover unpaid taxes. A wage lien is when the commonwealth seizes your wages. A bank lien is when the commonwealth seizes the funds in your bank account. A memorandum of lien is when the commonwealth secures its interest in your real or personal property. Here are the details about the different types of Virginia state tax liens. 

Wage Liens in Virginia

If you have unpaid state taxes, Virginia Tax has the right to withhold up to 100% of your net wages. The state will send a letter to your employer instructing them to garnish your wages. Your employer must comply with this request — generally, people who don't comply with wage lien requests risk becoming personally liable for the tax debt. 

Your employer will continue to garnish your wages until you have paid the balance in full, including penalties and interest. In most cases, your employer won't be able to see your balance. They will continue the wage lien until they get a notice that the lien has been removed. 

Bank or Other Institution Liens for Virginia State Taxes

Virginia Tax also has the right to issue a bank lien against you. The tax agency will send a notice to your bank asking them to put a lien on the funds in your account. The commonwealth can seize the entire balance in your account up to the amount of your state tax debt. 

The commonwealth can also seize the funds from certain investment accounts. In these cases, the process works the same. Virginia Tax sends a lien notice to the institution that holds your investment account. Then, the institution seizes the funds and sends them to Virginia Tax. 

By law, banks and other financial institutions are required to abide by these lien requests. They can't ignore the request and tell you to withdraw your funds before the lien goes into effect. They must put a hold on the funds and then send them to the state. 

Memorandum Lien

A memorandum of lien is when the Virginia Tax issues a public notice that you have an unpaid state tax bill. The Tax Commissioner issues the memorandum in the circuit court clerk's office in the county where you live or do business in. If you don't have a business or residence in Virginia, the commissioner will file the memorandum with the Circuit Court of the City of Richmond. 

With a memorandum of lien, the state doesn't seize your assets, but it secures its legal right to your assets. To give you an example, imagine there is a memorandum of lien against you and you sell some property that you own. The state has the legal right to the proceeds of the sale. In fact, the proceeds from the sale (up to the amount of the lien) will go directly to Virginia Tax. They won't go to you. 

Memorandums of lien stay in effect for 20 years. The state may be able to issue a new lien when the existing lien expires. 

Tax Refund Seizures

If you have unpaid taxes, the Commonwealth can seize your state tax refund. Virginia Tax can also send a notice to the IRS, and the IRS will send your federal refunds to the state. On the flip side, Virginia Tax can send your state tax refunds to the IRS if you have unpaid federal taxes. 

Tax refund seizures aren't just for tax debts. If you have unpaid bills to the VA Department of Social Services, other Virginia state agencies and courts, local Virginia governments, and some federal agencies, the commonwealth can keep your tax refund and apply it to your debts. This is called the VA refund offset program. 

What to Expect When Virginia Tax Issues a State Tax Lien

Virginia Tax must send you a Notice of Tax Lien and Demand for Payment 10 days before issuing a lien against you. However, the law does not require 10 days' advance notice if the tax collection is in jeopardy. In other words, if Virginia Tax believes that it may not be able to collect the tax unless it acts quickly, it doesn't have to give you notice before issuing a state tax lien. 

After issuing a tax lien against a business, Virginia Tax has the right to padlock the doors of the business if it's in the best interest of the Commonwealth. The state will also place a notice of distraint on the business's doors. 

Do not enter your business if it has been padlocked by Virginia Tax. Entering a padlocked business in this situation is a criminal misdemeanor. Contact the state as soon as possible to make arrangements on your business tax debt. If the tax continues to be unpaid, Virginia Tax can issue a writ of fieri facias. This gives the sheriff the right to seize your property and auction it off. 

What to Do If You Disagree With a Virginia Tax Lien

If you disagree with the tax bill that led to the tax lien, you should apply for a correction of assessment. If you think there was an error in the lien filing process, you can appeal. The Tax Commissioner has 14 days to review the appeal. If there was a mistake, they have seven days to release the lien. 

If your business has been locked up due to unpaid taxes and you have filed a correction of assessment, you can post a bond worth the amount of the tax liability. The bond can take the place of the payment until the state responds to your request for correction of assessment.

What If a Virginia State Tax Lien Is Causing Financial Hardship?

If the lien creates a financial hardship for you, you can ask the state to remove the lien. Virginia Tax will only remove liens for hardship if you have filed your taxes for the last three years. You also must complete a financial statement. 

To request hardship relief on a state tax lien, contact Virginia Tax using one of the following methods:

How to Remove a VA Tax Lien

Once a VA tax lien has been issued, it can be hard to remove. The best option is to make arrangements on your unpaid tax bill before Virginia Tax issues a lien. However, if there is already a lien in place, you may be able to remove it using one of the following methods:

Pay Your VA Tax in Full

If you pay your VA tax bill in full, the state will remove all of the tax liens against you. Paying your tax bill in full is the most effective way to get a lien removed. If you cannot pay in full and don't qualify for an offer in compromise or hardship, you can set up a payment plan. A payment plan will allow you to pay off the tax over time and stop collection actions against you, however, the state will still have a claim to assets until the balance is paid in full.

Apply for an Offer in Compromise

Alternatively, you may want to apply for a VA offer in compromise (OIC). If you're approved for an OIC, paying it satisfies your tax liability. Then, the lien should be removed. 

Request Hardship Relief

You may qualify for hardship relief if the tax lien prevents you from paying basic living expenses. To apply, you must submit a financial disclosure. However, Virginia Tax doesn't just consider your financial situation. The agency also considers your history of tax compliance. You can only get hardship relief on a tax lien if you have filed your tax returns for the last three years. 

Appeal the Tax Lien for Processing Errors

Virginia Tax must follow procedural rules when issuing a memorandum of lien. If the rules weren't followed, you can appeal the lien. Once you appeal, you should get a response within 14 days, and if there was a mistake, the lien will be removed in seven days.

Contact a VA Tax Professional

To get help removing a VA tax lien, contact a local tax professional. They understand the rules and collection practices used in Virginia, and they will be able to tell you the best way to get a lien removed in your situation. 

FAQs About Virginia Tax Liens

Do you have more questions about Virginia tax liens? To help you out, we've put together answers to some of the most commonly asked questions about VA tax liens. Have additional questions? Then, contact a Virginia tax pro directly. 

Can Virginia Tax Take All the Money in My Bank Account?

The state has the right to claim the entire balance in your bank and certain investment accounts, up to the amount that you owe. 

For instance, if you owe $10,000 in back taxes, penalties, and interest and you have $5,000 in your account, the state can take the entire amount from your account. However, if you owe $10,000 and you have $12,000 in your account, the state can only take $10,000. 

Are Any Bank Funds Exempt From State Tax Liens?

There are certain types of payments that the state cannot take. The following funds are exempt from Virginia state tax liens:

• Social Security, Supplemental Security Income, Veteran's benefits, Longshoremen and Harborworkers Compensation Act benefits, Federal civil service retirement benefits, and other federally protected benefits. 
• Black lung benefits
• Unemployment compensation
• Public assistance payments
• Child support payments 
• COVID-19 relief payments and loans

What Should I Do If Virginia Tax Seizes Exempt Payments?

If the state seizes exempt benefits, you should contact Virginia Tax and explain which funds they took that they weren't allowed to take. Make sure to provide supporting documentation. You can reach Virginia Tax about tax liens on exempted funds using the following contact details:

What Is the Difference Between a VA Tax Lien and an IRS Tax Lien?

Virginia Tax and the IRS use the word liens differently. If the IRS issues a federal tax lien, it's a public notice that secures the IRS's interest in your assets. In Virginia, this is called a memorandum of lien. 

If the IRS seizes your assets, it calls the seizure a levy. In contrast, if Virginia Tax seizes your assets, it calls the seizure a lien. 

Get Help With VA Tax Liens

If you're dealing with VA tax liens or other tax problems in Virginia, you should reach out to a local tax pro. Tax attorneys, CPAs, and enrolled agents are licensed to represent you in front of the IRS and Virginia Tax. They can help you negotiate payment arrangements with these agencies. They can also ensure your rights are protected. 

Ready to get help with your state tax lien? Want assistance removing a VA tax lien? Then, use TaxCure to search for a local tax professional in VA. You can filter your search to look for tax pros with experience with wage liens, bank liens, and more in Virginia. Don't let tax liens destroy your finances — contact a VA tax pro today.

Texas Sales Tax Requirements &What to Do If You Are Behind

Texas requires businesses to stay compliant with many taxes including a gross receipts tax, a sales tax, and an unemployment tax. Texas has a 6.25% state sales tax on all retail sales, leases, rentals, and many taxable services. If your business has nexus in Texas, you must collect sales tax from your customers and remit sales tax forms and payments to the Texas Comptroller. To help you out, this guide to Texas sales taxes explains the following:

• Businesses are required to collect Texas sales tax.
• The meaning of nexus in Texas.
• How to find the local sales tax rate in Texas.
• How to register for the Texas sales and use tax.
• How to report sales tax in Texas.
• How to pay sales tax in Texas.
• Due dates for Texas sales tax returns.
• Penalties for filing sales tax returns late in Texas.
• Penalties for paying sales tax late in Texas.
• Interest rates on late payments.
• Sales tax discounts.
• Texas sales tax audits.
• What to do if you were supposed to collect sales tax and didn't.
• Voluntary Disclosure for Texas sales tax.
• How to get help with Texas sales tax.

Who Needs to Collect Texas Sales Tax?

You must collect and pay sales tax if you sell, lease, or rent out retail goods in Texas. You must collect and pay sales tax if you have a clothing boutique or restaurant in Texas. Remote sellers who have nexus in Texas must also collect and pay sales tax. Note that the state does restaurant audits at high rates, so if you're in this industry you should pay close attention to the rules to ensure that your tax returns are audit-proof.

Taxable services include amusement services; cable television services; credit reporting services; data processing services; debt collection services; information services; insurance services; internet access services; laundry, cleaning, and garment services; motor vehicle parking and storage services; non-residential property maintenance; remodeling or repair services; personal services; real property services; security services; telecommunication services; telephone answering services; utility transmission and distribution services; and taxable labor including photographers, draftsmen, artists, tailors, and others. 

What Is Nexus for Texas Sales Tax?

Anyone who has a business based in Texas has nexus in the state. For instance, if you run a retail store in Austin, you must collect and pay Texas sales tax. Remote sellers only have nexus if they collect over $500,000 in revenue in Texas. 

For example, if you have a website and sell $1,000 in goods to Texas residents, you are under the threshold and don't have nexus in Texas. However, you are over the nexus threshold if you collect $600,000 in revenue selling goods or taxable services to Texas residents. By extension, you must collect and pay Texas sales tax. 

Remote sellers include anyone who sells goods or services through the internet, over the phone, using radio or TV advertisements, or through catalogs and flyers.

What Is the Local Sales Tax Rate in Texas?

In Texas, the state sales tax rate is 6.25%, but local governments are allowed to add up to 2%. To find the local sales tax rate in your area, you can use the Texas Comptroller's Sales Tax Rate Locator. Simply type in your address, and the locator will show you the rate for your area. 

If you have multiple business locations in Texas, you will need to know the rate for each area. Similarly, if you are a remote seller with nexus in Texas, the rate will vary based on the location of the customers that you sell to. 

How Do You Register for Texas Sales and Use Tax?

You can register for a Texas sales tax account online through the Comptrollers sales tax eSystem. Or you can apply via mail, email, or fax using Form AP-201 (Texas Application for Texas Sales Tax Permit). To apply online, you need the Social Security Number of the owners, partners, officers, or directors of the business. Corporations also need the file number from the Texas Secretary of State. If you register online, you should receive your sales tax permit in two to three weeks. 

How Do You Report Sales Tax in Texas?

When you receive your sales tax permit, the Texas Comptroller will let you know if you should file monthly, quarterly, or yearly. You can file online through the Texas Comptroller's sales tax eServices or by downloading software to use the Electronic Data Interchange (EDI). 

If you collected $49,999 or less in the last fiscal year, you can file a paper tax form. You should file using the preprinted form mailed to you, or you can download sales tax return forms from the Texas Comptroller sales tax site. 

How Do You Pay Texas Sales Tax?

All businesses can pay their Texas sales tax online using the Comptroller's sales tax eServices, through their EDI software, or with the TexNet system. If your business collected less than $10,000 in sales tax in the last fiscal year, you also have the option to pay Texas sales tax with a check. 

When Is Texas Sales Tax Due?

Texas sales tax returns are due on the 20th of the month following your reporting period or the next business day if the 20th falls on a weekend or a holiday. For instance, if your business reports sales tax annually, your sales tax return is due on January 20th. 

If you report quarterly, your sales tax returns are due April 20th, July 20th, October 20th, and January 20th. Monthly reports are due on the 20th of the month following the month of sales. For instance, your September sales tax return is due on October 20th. 

What Are the Penalties for Filing Sales Tax Late in Texas?

If you file your return late, you incur a $50 penalty. The penalty applies per report. If you file multiple reports, you will incur multiple penalties. The penalty for filing your Texas sales tax return late applies the first day you are late. 

What Are the Penalties for Paying Sales Tax Late in Texas?

If you pay the sales tax one to 30 days late, the late payment penalty is 5% of the tax due. The penalty is 10% for payments that are more than 30 days late. Keep in mind that the online payment channels have specific cut-off times. If you make your sales tax payment on the due date, it may not be credited until the next day if you make it after the cut-off time. 

If the state sends you a notice of tax or fee due, you will also incur an additional 10% penalty. This brings your total penalty for late sales tax to 20% of the tax owed.

What Is the Interest Rate on Late Sales Tax Payments?

The Texas Comptroller charges interest when your sales tax payment is 61 days or more late. The interest applies to your late sales tax and the penalties on your account. The interest rate changes annually, and it is the annual prime rate plus one. For instance, if the annual prime rate is 4.25%, Texas will charge you 5.25% annual interest on your late sales tax bill.

If you overpay and request a refund, the Texas Comptroller will also pay you interest. For instance, say that a bookkeeping error caused you to pay $1,000 in extra sales tax. When you fill out the refund request, the state will apply interest to this amount so you will get back a bit more than the $1,000. 

What Are Texas Sales Tax Discounts?

If you file and pay your Texas sales tax on time, the state will give you a discount of 0.5% of the tax due. For instance, if you're paying $10,000 in sales tax, you will receive a discount of $50. 

Monthly and quarterly filers can get an extra 1.25% discount if they pay estimated sales tax early and file on time. To get this discount, monthly filers must pay by the 15th of the month of sales and quarterly filers must pay by the 15th day of the second month of the quarter. 

For example, say that you're a monthly sales tax filer. To get the 1.25% prepayment discount as well as the 0.5% timely filing discount, you must pay your estimated January sales tax bill by January 15th. Then, your return is due on February 20th. 

Now let's say you are a quarterly filer in the second quarter of the year (April, May, and June). To get the prepayment discount, you must pay the estimated sales tax by May 15th, and your return is due on July 20th. 

Of course, you can't get this discount if you send in a lowball prepayment. The Texas Comptroller defines a reasonable estimated payment as at least 90% of your sales tax due for the tax reporting period or 100% of the amount due the previous period. 

Extensions for Texas Sales Tax Returns

You cannot request an extension for a Texas sales tax return. The only exception is if you are in an area declared as a disaster. The Texas Comptroller publishes a list of disaster areas declared by the Texas Governor. 

How to Amend a Texas Sales Tax Return

If you make a mistake on a Texas sales tax form, complete a new return with the correct information, write "amended return" on the top, and mail it to the Texas Comptroller's Office. Alternatively, you can just send in a copy of your original return with the changes noted on it and "amended" written at the top. 

Send your amended sales tax return to this address

Comptroller of Public Accounts

111 E 17th Street

Austin. Texas 78774-0100

If you underpaid your taxes, you should also send in a payment for the difference plus late penalties and interest. If you overpaid, you would need to apply for a refund. Use Form 00-957 (Texas Claim for Refund) to apply for a refund. Make sure to include any documents that support your refund claim. Generally, you must apply for a refund within four years of the tax due date. 

What Is a Tax Sales Tax Audit?

A sales tax audit is when the Texas Comptroller checks to make sure that you have collected, reported, and paid sales tax correctly. When you file a Texas sales tax report, you provide details about your sales and the amount of sales tax you collected, but you don't provide any supporting documentation. Basically, an audit asks for the supporting documentation.

To ensure tax compliance, the Texas Comptroller selects certain accounts for audit. During an audit, you basically prove the information on your sales tax return. For instance, you may show the auditor sales reports from your point of sale (POS) system or you may show bookkeeping records. The auditor will tell you what information they need to see. 

If the auditor wants to change any of the details on your sales tax returns, you can present new information if you disagree with the changes, but you must provide the information in a reasonable time frame. Once the audit has been finalized, you can request a formal hearing if you disagree with the results. 

The Comptroller tries to make the audit process as simple and streamlined as possible. As part of that effort, the Comptroller allows qualifying businesses to complete their own audits with a knowledge tax pro through the Managed Audit Process. But a sales tax audit can be a confusing and stressful process. To get help, contact a Texas tax pro who has experience with sales tax audits. 

What Should I Do If I Was Supposed to Collect Sales Tax in Texas, but I Didn't?

If you were supposed to collect Texas sales tax, but you didn't, you will face penalties and interest. By not paying sales tax, you subject yourself to all of the collection actions used by the Texas Comptroller, including tax liens, asset seizures, and wage garnishments. If the state believes that you have been purposefully evading sales tax, you may also face civil or criminal penalties. 

However, if you reach out to the state first, you may be able to minimize the damage. The Texas Comptroller offers a voluntary disclosure program for businesses that need to get caught up on unfiled and unpaid sales tax reports. It is always better to contact the taxing authority than to wait for them to contact you.

What is Voluntary Disclosure for Texas Sales Tax?

Sometimes, businesses don't know they're supposed to collect sales tax, or they fail to set up a sales tax account for some reason or another. To help taxpayers in this situation, the Texas Comptroller offers a voluntary disclosure program for sales tax. 

You must contact the Comptroller's Office first to qualify for voluntary disclosure. If they have already reached out to you about the delinquent sales tax or sent you an audit notice, you cannot use this program. 

When you make a voluntary disclosure for sales tax in Texas, you typically only have to file the last four years of returns. For instance, if you were supposed to collect sales tax for two years and you never did, you only will deal with those two years of unfiled and unpaid sales tax returns. If you were supposed to collect for six years, you will generally only deal with the unfiled and unpaid returns for the last four years. 

However, if you have been collecting but not paying sales tax, there is no limit to the lookback period. For instance, if you have been collecting sales tax from your customers for six years, you will need to deal with all of the unpaid sales tax and returns for that entire time period. 

The state also eliminates all of the penalties and interest on your account. However, you will pay interest if you have been collecting but not paying sales tax.

Can I Make Payments on Late Sales Tax Liabilities?

If you file behind on your sales tax payments, you may be able to make payments. However, this is never guaranteed. All taxes are due on the due date, and the Texas Comptroller tends to be strict with sales tax payments because they are collected from other people. In other words, you have collected the sales tax from your customers, and the state expects you to make the payments. 

However, if you're having difficulty paying your sales tax bill, you can apply for payments. The Texas Comptroller's Office makes decisions about payment plans on a case-by-case basis. You can apply by contacting the local field office in your area, or you can work with a tax pro. They can help you deal with unpaid sales taxes in Texas.

Why Are People Calling Me About My Texas Sales Tax Account?

Some issues related to your Texas sales tax account are public information. In particular, when you register for a sales tax account, that is public information. It's also public information if you're being subjected to a Texas sales tax audit. 

Salespeople find these public records and they use them as leads. As a result, when people register for a sales tax account, they often get a lot of phone calls from businesses selling services to help start-ups. Similarly, when businesses are being audited, they may get calls from accountants or tax resolution firms trying to sell them sales tax audit services. 

Ultimately, it's up to you if you want to work with a telephone salesperson. But you should never share private information over the phone until you have verified that the company on the other line is trustworthy. 

How Do I Get Help With Texas Sales Tax Issues?

Texas sales tax is a very specific part of the tax code. If you need help with Texas sales tax issues, you should contact a local tax pro who has experience with Texas sales tax. Texas tax pros can help you file delinquent sales tax returns, apply for penalty abatement, deal with Texas sales tax audits, and apply for voluntary disclosure. 

To find a Texas sales tax professional, use TaxCure to search for local Texas tax pros. Then, narrow down your search based on your unique tax problem. Once you have a list of results, you can review their profiles and reach out to the tax pro who looks like the best fit for you. 

Most tax pros offer free consultations. You get a chance to talk about your sales tax issue, and they give you an idea of your options and the best resolution path in your situation.

Florida Tax Audits: Guide for Business Taxpayers

The Florida Department of Revenue (FL DOR) has the right to audit your sales tax, option tax, corporate income tax, and other state tax returns. The basic premise of an audit is simple — the FL DOR wants to see proof of the information you reported on your tax returns. Although this sounds simple, a Florida audit can be a stressful and time-consuming process. 

This guide provides an overview of the Florida Department of Revenue audit process, what to expect if you're being audited, and how to get through an audit with as little stress as possible. It also explains how an IRS audit can affect your Florida tax returns. 

What to Expect With a Florida Tax Audit

During a Florida sales tax audit or an audit of any other Florida tax, the auditor will examine your records to verify the information on your tax returns. The department may audit just a few details from your return. Or it may conduct a major tax audit that looks at your sales and use tax, corporate income tax, local option taxes, and any other taxes your business pays to the FL DOR. 

There are desk audits and field audits. During a desk audit, the auditor stays in their office, and you send them the information they request. In contrast, if the auditor does a field audit, they will come to your place of business. 

If your returns are incorrect, the auditor will adjust them. Depending on the changes, you may end up owing additional tax or receiving a refund. The following sections outline more about what to expect during a Florida tax or accounting audit.

The FL DOR claims that its audits aren't just for tax compliance. The department says that audits can also be educational for taxpayers. For instance, the department says that it might show you how to improve your bookkeeping so that your returns are more accurate. 

However, you don't necessarily want to give a FL DOR auditor free rein over your bookkeeping records. To protect yourself and your business, you should work with a tax pro experienced with Florida tax audits. A Florida tax professional can ensure that you provide the auditor with the required information without giving them extra details that they don't have a right to see.

How the Florida DOR Selects Accounts for Audits

The FL DOR randomly selects some businesses for audits. In other cases, the agency audits businesses because of discrepancies with information from the IRS or tax agencies in other states. The agency also analyzes Florida tax returns, and if it sees signs of a potential issue, it may decide to do an audit. 

Florida Restaurant Tax Audits

The Florida DOR pays extra attention to Florida restaurants, which means they are often subject to audits more often than other Florida businesses. A possible reason for this is that many restaurant transactions are cash-based. One of the most common types of tax audits for restaurants is the sales tax audit. Practically every sale and transaction that takes place at a Florida restaurant could be subject to the sales tax unless an exception applies. Florida restaurants could also be subject to audits concerning other taxes, like the use tax. To protect your business, be aware of these common restaurant sales tax mistakes.

Types of Records You Need for a Florida Tax Audit

The types of records you need for a Florida tax audit vary depending on the type of audit. For instance, if the auditor is doing a Florida sales tax audit, you will need to provide records about your sales and the sales tax collected. Similarly, if you're undergoing a Florida Corporate Income Tax audit, you will need to provide records about your business's revenue and expenses. 

Here are some of the records the auditor may request:

• Florida income tax returns
• Florida sales and use tax returns
• Other Florida tax returns
• Federal tax returns
• Depreciation schedules
• Sales records 
• Invoices — especially if you run a car repair business
• Purchase records
• Property records
• Check registers
• Canceled checks
• General accounting ledgers and journals
• Cash receipt journals
• Purchase and sales journals
• Sales tax exemption or resale certificates
• Corporate charters
• Any other documents that support details reported on tax returns. 

You can supply your records in paper or digital format, but sometimes, you may be required to provide digital documents. At the beginning of the audit, the DOR will send you a questionnaire to determine if you can complete the audit electronically. 

What Happens If You Don't Have the Records for a Florida Sales Tax Audit or Other Florida Tax Audit?

Florida law says that you must keep your records for at least three years after the due date of your tax return. Generally, the FL DOR only goes back three years or less during an audit. However, there are exceptions to this rule. If you didn't file a return or if you filed a return with substantial errors, the department can go back further than three years. 

If you don't have records because it's past the three-year mark or for any other reason, the auditor will estimate your tax liability based on the available information. This can often lead to unnecessarily high tax liabilities. Ideally, you should keep your records, but if you're going through an audit and you don't have all of your records, you should get help from a tax lawyer, enrolled agent, or accountant with FL audit experience. 

A Florida tax pro can help you reconstruct your records. They can also ensure that your rights are protected during the audit. 

Types of Florida Tax Audits

The Florida DOR administers 36 different taxes, and it has the right to audit information for any of these taxes. Here are some of the most common types of Florida tax audits.

Florida Sales Tax Audits

A sales tax audit is one of the most common audits for Florida businesses. If you receive a notice of a Florida sales tax audit, you have 60 days to prepare, and the audit must start within 120 days. During the sales tax audit, the auditor will look at copies of your Florida sales tax returns, and they will request records from you to verify the information on your returns. 

For instance, if the FL DOR is auditing all of your 2021 sales tax returns, the auditor will likely request to see copies of the sales reports from your point of sale (POS) system for the entire year. If you don't run all of your sales through a POS, the auditor may ask to see other records. 

The auditor may also request to see bank statements. For instance, if you have a lot of unexplained deposits, the auditor may have reason to believe that you're making sales that you're not reporting. 

Sometimes, a Florida sales tax auditor may discover that you have overpaid sales tax. For instance, imagine that your bookkeeper accidentally classified a business loan as revenue, and when they filed the sales tax report, they paid sales tax on the amount of the loan in addition to your sales. If the auditor sees this type of mistake, they will adjust your sales tax returns and issue you a refund. 

Use Tax Audits During a Florida Sales Tax Return

During a sales tax audit, the auditor may also look for signs that your business owes use tax. For instance, if your business purchased a vehicle in another state and never paid Florida use tax, the auditor will note that fact. Then, they will go through the process of assessing the use tax against you. 

Many business owners overlook the use tax portion of their Florida sales tax returns. But if you purchase items online or out of state and don't pay tax, you are supposed to report these purchases and pay use tax. Taxable purchases go on line B of your Sales and Use Tax Return. 

FL Sales Tax Audit for Remote Businesses With Florida Nexus

If you have nexus in Florida, you are required to collect and remit sales tax on taxable goods and services. Which businesses have nexus in Florida? Businesses that are based in Florida have nexus in the state, and remote businesses have nexus if they have taxable Florida sales of more than $100,000 in a year.

For instance, if you run an eCommerce business and sell $50,000 in goods to Florida residents, you don't have nexus in the state unless you meet the location requirements. So, you don't have to register or collect sales tax. However, if you sell $200,000 in taxable goods or services to customers in Florida, you are over the nexus threshold and must pay Florida sales tax. 

In addition to auditing businesses that are based in Florida, the FL DOR may do sales tax audits on remote businesses. The audit will focus on your sales tax returns if you have filed sales tax returns. If you have not filed, the audit may focus on whether or not you have nexus in the state, and if so, they will start the audit process into the returns you should have filed. 

Florida Corporate Income Tax Audits

A Florida corporate income tax audit follows the same initial timelines as a Florida sales tax audit. After you receive the notice, you have 60 days to prepare, and the audit must start in at least 120 days. Take your time to prepare. A Florida corporate income tax audit can be a very lengthy process, and you want to ensure that you have everything ready before you start the audit. 

During a corporate income tax audit in Florida, the auditor will look at the majority of your business records. They want to ensure that you have reported all of your business revenue correctly and haven't overstated any of your business expenses. They will also look at any property you've purchased, depreciation schedules, bank records, and a variety of other business records. 

Florida Reemployment Tax Audit

Every year, the FL DOR audits 1% of all businesses that pay reemployment tax into the Unemployment Compensation Trust Fund. For reemployment tax audits, the FL DOR selects some accounts at random. The department also looks for anomalies on your return based on statical data for your industry, business size, location, or aberrations between your return and federal or third-party data. The department also audits some employers that are dealing with reemployment assistance claims and collection items. 

During this audit, the auditor will look at earnings and tax documents related to your employees. This may include your Form 940 (Employer's Annual Federal Unemployment Tax (FUTA)) returns and other employment tax returns such as Forms 941, 943, or 944. The auditor will also want to see your W-2 and W-3 tax forms as well as individual earnings records. 

They may also request your payroll summaries, payroll ledgers, and individual earnings records. To ensure you are classifying your employees correctly and not paying people as independent contractors to avoid paying reemployment tax, the FL DOR auditor may request to see independent contractor agreements and 1099-NEC forms. 

Florida Option Tax Audits

In most cases, when the Florida DOR does an extensive audit of sales tax or corporate income tax, the auditor will also do a smaller audit on a tax such as the option tax. Option taxes are local taxes such as discretionary sales surtaxes, local option fuel taxes, transient rental taxes, tourist development taxes, tourist impact taxes, convention development taxes, local option food and beverage taxes, or municipal resort tax. The documents you will be asked to provide may vary based on the type of option tax being audited. 

Florida Self-Audit or Self-Analysis

A self-audit or self-analysis project is when the FL DOR has the taxpayer complete the audit process. Generally, Florida self-audits focus on a relatively narrow issue related to a specific type of tax. If you're selected for a self-audit, the DOR will send you information about the tax, instructions, and worksheets. 

You will complete the worksheets independently and determine if you owe any additional tax. The auditor usually won't call you or come to your business. Generally, the FL DOR accepts the information taxpayers provide during a self-audit, but your account can still be selected for a convention audit. To ensure you provide the right details, you may want to hire a tax pro to help with your Florida self-audit.

What Is Notice DR-840?

To notify you that you have been selected for an audit, the FL DOR will send you Notice DR-840 (Notice of Intent to Audit Books and Records). Generally, Florida Notice DR-840 means that the department is doing a full audit. The notice will explain which taxes are being audited, the timeline for the audit, and the statutes relevant to the audit. 

If you need help understanding Notice DR-840, contact a tax attorney, accountant, or enrolled agent. They can help you decipher the notice and prepare for your audit. 

What Is Notice DR-846? 

In the past, if the FL DOR selected you for a limited scope or self-audit, the department would send you Notice DR-846 (Notice of Intent to Conduct a Limited Scope Audit or Self-Audit). Typically, the department used this notice when it audited issues related to commercial rent or out-of-state purchases. 

However, in recent years, the FL DOR often used Notice DR-846 and DR-840 interchangeably. As a result, you may receive Notice DR-846 if you're facing a full audit. In all cases, the notice should explain what is being audited, the audit deadlines, and your rights under the Florida state law. If you're not sure what Notice DR-846 means, contact a FL tax pro to help you.

What Is Notice DR-1212?

Generally, you receive FL DOR Notice DR-1212 (Notice of Intent to Make Audit Changes) after the audit is complete. This notice details the changes the auditor is proposing to your Florida tax returns. However, in some cases, businesses receive this notice before the above audit notices. 

If you receive this notice and you have not gone through an audit, it means that the DOR is making changes to your account. Make sure that you contact the department as soon as possible if you disagree with the changes. If you don't reach out, the assessment may become final, and you may lose your chance to protest the tax.

What Is eAuditing in Florida?

If you are selected for a Florida sales tax or any other type of Florida tax audit, you may hear the phrase eAuditing. Also called electronic auditing, eAuditing simply refers to providing the requested documents electronically. 

Generally, when the FL DOR notifies you about an audit, it will send you a questionnaire to determine if your business can do an e-audit. If so, you will send in your documents electronically, and the auditor will use computer programs to analyze the information. 

In many cases, you can choose whether or not you want to do an eAudit. However, if you keep sales and use tax records in an electronic format, you must provide them to the department in an electronic format. This is a requirement.

Your Rights During a Florida Tax Audit

During a Florida tax audit, you have the following rights:

• To receive prompt and accurate responses to your questions and requests for help.
• To be represented by a tax lawyer or other qualified representatives such as a CPA or enrolled agent.
• To ask for help from a taxpayer's rights advocate if you can't resolve problems through the usual administrative channels or if you have received poor treatment from the auditor.
• To record interviews.
• To have penalties and interest removed when you have received incorrect advice from the FL DOR in response to an accurately written request for information. 
• To have interest waived when it's due to errors or delays caused by an employee of the department.
• To obtain straightforward and nontechnical statements about why you were selected for an audit. 
• To be informed of collection actions related to property seizures or asset freezes (except in cases of jeopardy assessment). 
• To request an immediate review of a jeopardy assessment.
• To have your information kept confidential. 
• To recover damages when the DOR causes injury through wrongful or negligent acts or omissions. 
• To recover legal costs if you're the prevailing party in a judicial or administrative action brought forward without justiciable issues of fact or law. Note that the department has the right to recover legal costs if it is the prevailing party in the same situation. 
• To have the audit completed in a timely manner. 
• To participate in free educational activities that help you comply with Florida state tax laws. 

These are only some of your rights. Florida taxpayers have even more rights during an audit. To ensure your rights are protected, you should work with a tax professional experienced with Florida tax audits. They will be able to answer your questions and ensure that the tax auditor respects your rights while conducting the audit. 

Are Florida Tax Audits Educational?

The FL DOR says that audits should be educational, and it gives you the right to get prompt and easy-to-understand answers to your questions. While this is true in theory, it doesn't always happen in practice. By law, auditors are not allowed to receive any bonuses or commissions based on the amount of tax they assess, but they are often "graded" on how quickly they complete audits. If you have an auditor who is trying to speed through the process, your legal rights and the accuracy of the audit may get lost along the way.

For instance, some auditors push taxpayers to provide information before the 60-day time limit is up. You are never required to provide information to an auditor until 60 days after you receive the audit notice. But many taxpayers are intimidated by auditors. They comply with requests that aren't necessarily in their best interest. A tax professional can help to protect you. They ensure that you don't have to deal with unnecessary demands that infringe on your rights. They also ensure that the audit is done fairly and accurately. 

Timeline for a Florida Tax Audit

When you receive the audit notice, you have 60 days before the audit starts. In some cases, auditors may request information early, but once you start providing information, the audit starts. You lose the 60-day window. To ensure you have everything you need to complete the audit, you should take full advantage of this time period. 

The audit must start within 120 days of when the audit notice was issued. Generally, that means the audit should start between two and four months after you receive the notice of audit. 

In Florida, audits are supposed to be wrapped up within a year. To ensure you have time to contest the audit if you disagree, most auditors try to complete the process in nine months. However, some Florida tax accountants report that audits can take over a year.

What Is the Statute of Limitations on a Florida Sales Tax Audit?

Once a sales tax return has been filed, the FL DOR has three years to audit it. However, if you don't file a sales tax return, the department can go back any amount of time. Additionally, the three-year statute of limitations doesn't apply if your sales tax return had substantial errors.

Statute of Limitations on Florida Corporate Income Tax Audit

The FL DOR observes the same time limit for corporate income tax audits as it does for sales tax audits and all other types of Florida tax audits. Generally, the department can only go back for three years. But again, if you haven't filed a return or if you filed a substantially incorrect return, the department can go back more than three years. 

How an Active Florida Tax Audit Affects the Statute of Limitations

Notice DR-840 pauses the statute of limitations. The statute of limitations stays paused until the audit is complete. How does a toll on the statute of limitations work? Check out this example. 

Imagine that you receive Notice DR-840 on January 2, 2022, and the FL DOR says that it is going to audit your annual sales tax returns for tax years 2020, 2019, and 2018. Your 2018 annual sales tax return was due on January 20th, 2019. As a result, the statute of limitations to audit this return normally expires on January 20th, 2022. However, the DR-840 notice paused the clock on January 2nd, 2022. As a result, the department can still audit your return. 

How to Pay Your Florida Audit Assessment 

If you owe additional tax after the completion of the audit, it is due immediately. You can pay the tax by mailing a check or money order to the Florida Department of Revenue. Send the payment to the following address:

To ensure your account gets credited correctly, write the audit number and the tax type on your check or money order. Don't send the payment with your other FL DOR payments, or it may be credited to the wrong account. You may also incur additional penalties/interest or face collection actions.

If you cannot afford to pay the audit assessment, contact the FL DOR to talk about payment options. The DOR may be willing to offer you payments on a case-by-case basis. Typically, the state applies a 10% penalty on all taxes once they are 90 days late. This penalty will apply to your account after your protest period has ended. Depending on the type of tax involved, you may occasionally even be able to settle for less than owed through an offer in compromise, but there are strict restrictions and requirements.

What to Do If You Disagree With the Outcome of a Florida Tax Audit

If you don't agree with the results of the audit, you have the right to protest. This applies to Florida sales tax audits as well as any other types of Florida audits. 

You can make an informal protest in writing, but you must do so within 60 days of the date the DOR issues the Notice of Proposed Assessment (NOPA). Your informal protest should include your name, the tax type, the amount of tax protested, a schedule of the protested adjustments, and a statement of factual or legal grounds for the protest. 

After the DOR reviews your protest, the department will issue a Notice of Decision (NOD). If you still disagree, you can file a petition for review by the Division of Administrative Hearings (DOAH), or you can file an action in the circuit court or in the relevant Florida District Court of Appeals. 

Alternatively, if you disagree with the results of your Florida audit, you can make a formal protest. Before making a formal protest, you must pay any taxes that you agree with as well as the penalties and interest associated with those taxes. Then, you can file a protest through the DOAH or the circuit court. 

You must make the formal protest within 120 days after the DOR issues the Notice of Proposed Assessment (NOPA). If you're pursuing a formal protest after making an informal protest, you must do so within 60 days of receiving the Notice of Decision. You cannot extend these deadlines. 

Changes to Florida Corporate Income Tax After IRS Audit

If the IRS makes changes to your corporate income tax return during an audit, the changes are likely to affect your corporation's taxable income in Florida. Generally, you must submit an amended Florida corporate income tax return within 60 days after the IRS's adjustments are finalized. To amend your Florida return, use FL DOR Form F-1120X (Amended Florida Corporate Income/ Franchise Tax Return). 

Note that you don't have to file an amended Florida return in the following situations:

• The IRS changes only involved a carryback of a net operating loss or a capital loss. 
• The IRS audit only increased or decreased a net operating loss. 

As you can see, neither of these changes increased your corporation's taxable income. As a result, you don't have to report the changes to the Florida DOR. 

If the IRS audit changed your taxable income, you must report the changes to the FL DOR by filing an amended return. If you owe additional tax, you will need to pay the tax plus interest that has accrued from the original due date of the return. If the IRS audit lowered your taxable corporate income, you might be able to claim a refund from the FL DOR. 

In some cases, you may need to file multiple amended Florida corporate income tax returns. This happens when there are disputes during the IRS audit. For instance, if you and the IRS agree on some changes, but others are still under debate, you will need to file an amended Florida corporate income tax return within 60 days of the agreed-upon changes. Then, when any other changes are agreed upon, you will need to file an additional amended return. Repeat this process as many times as necessary.

If you make a payment of disputed IRS tax amounts so that you have the right to contest a federal assessment, you don't have to submit the amended return for those changes. Those changes are still in dispute. By extension, the payment does not count as tax paid in relation to the 60-day filing requirement. However, once the dispute is resolved and the IRS or the courts issue a final decision, you will need to amend your corporate Florida return.

Get Help With a Florida Tax Audit

A tax audit can be an intimidating and scary process. It can also take a lot of time that you don't have when you're running a business. Additionally, tax audits can lead to assessments against you. If you don't have the right records or if you don't understand certain elements of the tax code, you may even end up facing a larger tax liability than you should. 

Audits also have strict deadlines, and if you miss them, you may lose out on the opportunity to share your side of the story or contest the results of the audit. 

Local Florida tax accountants, enrolled agents, and tax lawyers can help you deal with Florida sales tax audits and other state tax audits. Using TaxCure, you can search for Florida-based tax professionals who have experience helping clients with tax audits. Then, you can review their profiles and select the person who has the right experience for your situation.

Don't let a Florida tax audit stress you out or cause damage to your business. Instead, get help from a local Florida tax professional today.

How to Reinstate LLC in Texas: Guide for Texas Business Owners

In Texas, the Secretary of State can involuntarily terminate your LLC, LP, LLP, Corporation, or Nonprofit Corporation if you do not file required annual reports and pay the Texas franchise fee, maintain a registered agent, or pay filing fees. This can be stressful, and it put you at grave professional risk. But luckily, you can reinstate a Texas LLC or any other terminated business entity.

To help you, here is an overview of what you need to do if the Texas Secretary of State has involuntarily terminated your LLC If you need help, contact a Texas tax professional with experience with the LLC reinstatement process.

The following sections outline what you need to do to reinstate a Texas LLC To protect your business and personal assets, you may want to work with a local Texas tax pro experienced with LLC reinstatement. The process can be confusing without professional assistance.

What Does an LLC Termination Mean?

If the Texas Secretary of State terminates your LLC, you lose the benefits of having an LLC. An LLC establishes your business as a separate entity. Without the LLC, you become personally liable for business debts and lawsuits, and you will not be able to open bank accounts or take out business loans. Note however, that a termination does not impair the validity of any contract.

How Do I Reinstate My LLC in Texas After an Involuntarily Termination?

To reinstate your Texas LLC, you need to do the following:

• File the missing forms and pay any delinquent taxes and fees.
• Obtain a Texas tax clearance letter from the Comptroller of Public Accounts.
• Apply for reinstatement with the Texas Secretary of State.

How to File and Pay Late Franchise Taxes After Involuntary LLC Termination

To reinstate a Texas LLC, you must file your franchise tax reports and pay any tax, penalties, and interest due on your account. The franchise tax reporting process varies depending on the level of activity of your business. The Texas Comptroller has links to forms and instructions on its website.

In addition to paying the late franchise tax, you will also need to pay a $50 penalty for each late report. Normally, franchise taxes are due on May 15 or the following business day if the 15th falls on a holiday or weekend. If you are paying one to 30 days late, you will also need to pay a penalty of 5% of the assessed tax. A 10% penalty applies for payments made more than 30 days late. Interest begins accruing on the account once it is 61 days late. Interest rates fluctuate, but as of 2022, they are the annual prime rate plus 1.

How to Obtain a Tax Clearance Letter

To obtain a tax clearance letter, you must file Form 05-391 (Tax Clearance Letter Request for Reinstatement).It requires your business name, 11-digit Texas taxpayer number, and the address where you want the Comptroller to send the clearance letter. You can opt to receive the clearance letter by mail, fax, or email.

After you complete these activities, the Texas Comptroller will send you Form 05-377 (Tax Clearance Letter). Send the letter along with the reinstatement forms and filing fees to the Secretary of State.

Cost and Time to Get a Tax Clearance Letter

The timeline to receive a tax clearance letter can vary. If you request the letter through the mail, you should expect to wait three to four weeks for processing. The Texas Comptroller generally processes online requests right away. There is no cost for a tax clearance letter in Texas,

Secretary of State Texas Reinstatement for LLC

As explained above, you will need to send the Secretary of State a request to reinstate your LLC in Texas. Once you have met the filing and payment requirements and received the tax clearance letter, you will need to request LLC reinstatement from the Secretary of State. There are a different forms used to request the Secretary of State's reinstatement. The right form depends on your situation. Here is an overview of which forms to file based on the reason your LLC was terminated.

If failure to pay franchise tax involuntarily ended your LLC

You should file Form 801 (Application for Reinstatement and Request to Set Aside Tax Forfeiture) if failure to pay franchise tax, involuntarily ended your LLC or other business entity.

You should not use this form if you want to reinstate a voluntarily terminated LLC. This form also does not apply if the SOS terminated your business registration for an issue other than a tax forfeiture or if a court order terminated your business.

Texas Form 801 requires the legal name of your business, your SOS file number, the date of forfeiture or revocation, and your signature. You should also include a copy of your tax clearance letter and a $75 fee. If you do not have the SOS file number, you can submit the form without it, but this can create processing delays.

If issues other than unpaid taxes led to involuntary termination

In Texas, the Secretary of State can involuntarily terminate your business if you do not file required reports, pay fees or penalties, or maintain a registered agent. In these situations, you should file Form 811 (General Information — Certificate of Reinstatement) to reinstate your business.

Form 811 requires the name of your entity, the SOS file number, the jurisdiction of your business, and the date of termination. You also must detail the reasons for termination and explain what you have done to rectify the situation. Remember to include a tax clearance letter. The tax clearance letter is required unless you run a non-profit organization. Send a $75 filing fee with this form.

How To File Reinstatement Forms with the Texas Secretary of State

Once you complete the correct reinstatement form for your situation, you can mail, fax, hand deliver, or electronically submit it. To electronically submit your Texas LLC reinstatement request, go to SOS Direct or email the request to corpinfo@sos.texas.gov.

To mail the form, use this address:

Or you can hand deliver your form to the Secretary of State at this address:

Alternatively, you can fax the LLC reinstatement forms to (512) 463-5709. If you apply for reinstatement over fax, you should include Form 807 (Secretary of State Payment Form) with your credit card details.

How Long Does Reinstatement Take?

Typically, after you send the reinstatement forms to the Secretary of State, they are processed in about five to seven business days. 

Potential Issues with Texas Business Reinstatement

In order to be reinstated, you need to complete the three steps explained above:

1. File delinquent reports and pay late taxes, fees, penalties, and interest.
2. Obtain a tax clearance letter. 
3. Request reinstatement from the Texas Secretary of State. However, there are some potential obstacles that may occur along the way.

Here is a breakdown of the issues you may face when you reinstate a Texas LLC or other business entity.

Business Name Taken by Another Entity

If Texas involuntarily terminates your business, your business name will no longer appear in the registry of business names. This means that other people can take your business name. If you apply for reinstatement and your name is no longer available, you will need to change your business name or get consent to use that name.

You May Need to Change Your Registered Agent

Your registered agent accepts tax and legal documents on behalf of your business, and you will need to provide their information when you request a Texas LLC reinstatement. However, in most situations, you cannot use the reinstatement form to name a new registered agent.

In this case, you will need to complete Form 401 (General Information — Change of Registered Agent/Office). This form is fairly short and just requires details about your business and the registered agent. Include this form with your reinstatement request.

However, if your business was terminated due to issues with your registered agent, you can use the reinstatement form to name your new registered agent. If this describes your situation, you should note the details about the new registered agent on Form 811, and you do not have to include Form 401.

Cost to Revive an LLC in Texas

The cost to revive an LLC in Texas varies based on each situation. As noted above, the reinstatement fee with the Texas Secretary of State is $75 as of 2022. You can also pay $25 to have the form expedited. In addition, you will need to pay any taxes, fees, or penalties related to your involuntary business termination.

There is also a fee to change your registered agent with Form 401 or file a certificate of amendment. These forms have a $150 filing fee each.

If you decide to hire a Texas tax professional to help with the maze of filing requirements, you will pay them a fee as well. By hiring a professional, you ensure the process goes smoothly, and you get your business reinstated as quickly as possible.

Get Help With Texas LLC Reinstatement

Every year, the Texas Secretary of State involuntarily terminates tens of thousands of LLCs and other business entities. If your business is involuntarily terminated by the Secretary of State, you need to reinstate it. The process can be confusing, especially if you have a lot of unfiled forms or unpaid taxes. Issues such as another entity taking your name or changing your registered agent can also complicate the process.

You should work with a Texas tax professional. A Certified Public Accountant (CPA), Texas Attorney or an enrolled agent can help you with the process. How do you find someone to help with LLC reinstatement in Texas? By using TaxCure.

TaxCure's search feature lets you look for Texas tax prfessional who have experience with LLC reinstatement. Once you do a search, you can read the profiles of multiple professionals. Then, you can choose the tax pro that looks the best to you and give them a call for a free consultation. To get help now, search for a Texas tax pro today.

today.

 

Michigan Tax Levy Overview: How to Release or Stop a Tax Levy

If you don't pay your state taxes, the Michigan Department of Treasury (MI DOT) has the right to levy your assets. A levy is when the state seizes your assets and uses them to reduce your tax debt. Also called a tax warrant, a levy is an involuntary collection practice. 

This guide explains what to expect if the state issues a tax levy against you. It also outlines how to get a levy released. Then, it shows you how to get local, experienced help with your Michigan tax problems. 

What Is a Michigan Tax Levy?

A Michigan tax levy is when the state seizes your assets. In Michigan, the state uses the term warrant as well as levy. These words can be interchangeable, but generally, the Michigan Department of Treasury uses the word warrant when it sizes personal or real assets. It uses the word levy when it seizes the funds in your bank account or garnishes your paycheck. 

Michigan Notice of Intent to Levy

Before levying your assets, the state will send you a Notice of Intent to Levy. This explains the state's intention to levy your assets. It generally shows how much you owe in tax, interest, and penalties. Then, it tells you which type of levy the state plans to carry out against you. 

Types of Tax Levies in Michigan

The Michigan Department of Treasury uses several different types of tax levies. As of 2022, the department adds a $55 fee to your account for each levy served. This can add up quickly if the state issues multiple levies against you. If you have unpaid state taxes, you may face the following types of tax levies in Michigan:

Wage Levy

A wage levy affects your wags. The department will send you a notice ten days before sending the wage levy request to your employer. Once your employer receives the request, they must withhold all your wages over the exempt amount and send the money to the state. 

Wage levies are continuous. They stay in effect until the tax debt is paid. Although you get to keep the exempt amount, it is not much. It's barely enough to cover most people's basic living expenses. The state takes everything over the exempt amount, including bonuses and commissions. Luckily, in Michigan, state law prohibits your employer from firing you if you have one or more wage levies against you. 

Tax Warrants

If you have unpaid Michigan taxes, you may eventually hear the phrase "tax warrant." You're probably wondering, what is a tax warrant in Michigan? Well, a tax warrant authorizes the sheriff or another entity to seize your real or personal assets and sell them at auction. 

When a tax warrant is issued against you in Michigan, the state will add collection fees and the cost of carrying out the warrant to your balance. This may include locksmith costs, towing company fees, storage costs, fees for advertising the auction, and personnel costs. 

The state can also use a tax warrant to close your business and sell its assets. The department must notify you at least ten days before the property is seized. Generally, the state can't sell the business property until ten days after it's been seized, but it can sell perishable items within 24 hours. 

Financial Institution Levy

A financial institution levy is when the state seizes the funds in your bank account. The state can seize any amount in your account up to the balance due on your state taxes. 

This is a one-time levy. It attaches to the funds in your account when the bank receives the levy. It does not attach to future funds. However, the state does have the right to send multiple one-time levies to your financial institution. 

Offset Refund Levies

An offset refund is when the state seizes your state or federal tax refund. The Michigan Department of Treasury has the right to seize these payments if you have a delinquent tax bill. Even if you're making payments on an installment agreement, the state has the right to seize your tax refunds and apply them to your balance. 

Other Third Party Levies

If you have delinquent taxes, the state also has the right to levy assets held by third parties. This includes rent from tenants, payments from clients, or insurance proceeds as well as other assets. 

For example, imagine that you owe delinquent Michigan taxes and you own a rental property. The MI Department of Treasury can instruct your tenants to send the rent directly to the agency to cover your tax bill. Again, the state will notify you ten days before sending the levy notice to the third party.

How to Prevent a Michigan Tax Levy

The best way to prevent a Michigan tax levy is to pay your tax liability in full or make payment arrangements with the Michigan Department of Treasury. If the department can see that you're making a good faith effort to pay your tax liability, it generally will not bring a levy against you. However, this varies based on the type of levy. 

For instance, if you pay in full, the state will not bring any levies against you. If you set up a payment plan or apply for hardship status, the state will not levy your wages, bank accounts, or most assets. But it may still claim your IRS and state tax refunds. It can also claim lottery winnings and state vendor payments. 

How to Release a Michigan Tax Levy

If you want to get a tax levy released, you need to pay the tax liability in full. Alternatively, you may be able to get a levy released if it was issued in error. For instance, if the department didn't send the correct notices or if the levy is against exempt assets, you may be able to get it released. 

What If I Disagree With a Michigan Tax Levy

If you disagree with a tax levy, you have the right to appeal, but you may need to do so within a certain time frame. Generally, when the state sends you a Final Notice and Intent to Levy, you must appeal within the time frame noted on the letter. 

If a levy is already in place, there may be certain actions that you can take if you disagree. In particular, if the levy was issued in error, you can reach out to the Department of Treasury to release the levy. You should contact a Michigan tax pro to guide you if you disagree with a tax levy. 

What Assets Can the Department of the Treasury Levy in Michigan?

If you have delinquent taxes, the Department of the Treasury has the power to levy almost any of your assets, including your home. The state of Michigan follows the IRS's rules for deciding which assets are exempt from levy. Based on the Internal Revenue Code, Michigan cannot levy the following assets:

• School books and clothing.
• Fuel, provisions, furniture, other personal effects, and livestock and poultry for personal use, worth up to $6,250 in value. 
• Books and tools that you use for your business, worth up to $3,125 in value.
• Unemployment benefits and workman's compensation. 
• Undelivered mail. 
• Certain annuities and pension benefits, including Railroad Retirement benefits and pensions for people whose names are on the Medal of Honor roll for the Army, Navy, Air Force, and Coast Guard.
• Court ordered payments (child support) for minor children. 
• The exempt amount of wages needed to cover basic living expenses. 
• Public assistance payments.
• Assistance from the Job Training Partnership Act.
• Personal residences (homes) if you owe less than $5,000. 

Additionally, the department may refer your account to a collection agency or to the attorney general. Depending on the situation, these entities may also be able to levy your assets.

Michigan Tax Levy Versus Tax Lien

A tax levy is when the state seizes your assets. A lien, in contrast, is the state's legal right to your assets. Generally, a lien must exist before a levy.

Here's an example of the difference. If a lien is in place and you sell your vehicle, the state has the right to seize the proceeds from the sale. In contrast, if the state levies your vehicle, it seizes the vehicle and sells it at auction. At that point, the state has the right to the proceeds from the sale, but it will also add the costs of seizing and selling the asset to your balance. 

Get Help With a Michigan Tax Levy

If the Michigan Department of Treasury has issued a levy against you or if you are worried about a levy, you need to talk with a Michigan tax professional. CPAs, tax lawyers, and enrolled agents can all represent you in front of the Department of Treasury and the IRS. 

These professionals know the best steps to take to release Michigan tax levies and deal with other collection actions. They can help you choose the best path forward. Using TaxCure, you can search for tax pros based in Michigan, and you can filter your results based on experience with certain tax issues.

To learn more, contact a Michigan tax pro today. They can help you address the state tax levy and find the best resolution for your tax problems.