10 replies to this topic

[westcoastlv]

Hi All, I have a question regarding Disability lump sum payment and back taxes. My husband and I are in a payment arrangement with the IRS for back taxes. We pay them a monthly amount, and they keep whatever tax refund we get and apply it toward the balance. No problems there.

My question is: when my husband receives his retro pay for his va claim, can the IRS take that money to apply toward the tax debt?

We don't currenlty have any liens or action from the IRS, just a payment agreement that we honor.

[john999]

I think I would consult with a tax lawyer. You want to get this right.

[jbasser]

Hi All, I have a question regarding Disability lump sum payment and back taxes. My husband and I are in a payment arrangement with the IRS for back taxes. We pay them a monthly amount, and they keep whatever tax refund we get and apply it toward the balance. No problems there.

My question is: when my husband receives his retro pay for his va claim, can the IRS take that money to apply toward the tax debt?

We don't currenlty have any liens or action from the IRS, just a payment agreement that we honor.

If you can, give me a little more information.

a: Is he still working?
b: Did he quit because of a disability?
c: Is the tax problems a result of cashing out a 401K?

If this is the case then somemthing can be done.


On the other hand, if you owe a goverment agency the agency can take what is owed. Especially if you are using direct deposit.

J

[westcoastlv]

He is not working, he stopped working because the job ended, but due to the disability, he is unable to get another job. The tax problems are not because of cashing out a 401, just taxes due from years ago. I have been actively paying on the arrangement and there are no liens. However, in spite of the information below, if they take even a penny of the back pay, I fear my husband will really lose it.

I read on the IRS website:

There shall be exempt from levy—
(10) Certain service-connected disability payments Any amount payable to an individual as a service-connected (within the meaning of section 101 (16) (The term “service-connected” means, with respect to disability or death, that such disability was incurred or aggravated, or that the death resulted from a disability incurred or aggravated, in line of duty in the active military, naval, or air service.) of title 38, United States Code) disability benefit under— Veterans disability benefits have specific protection from levy or seizure under United States Code Title 26, 6334. The IRS cannot seize the benefits to pay a tax debt under that law.

[Papa]

"The IRS cannot seize the benefits to pay a tax debt under that law." I really don't think this will protect you and your husband. What this means is that the IRS can not go directly to the VA and tell them that this Veteran owes back taxes, and we would like for you to sent us a check instead of to the Veteran. They can not do that, but once it is direct deposited into your bank account, the IRS may have the lawful means of obtaining the funds. However, what I would do is go to your local IRS office and plainly ask them will they go after my husbands VA disability lump sum to pay off these taxes? Another thing you may want to consider is the kind of interest and penalties charges you are paying on these back taxes by paying a certain amount each month. Another thing I would do at the IRS office is tell them that my husband is a disabled Veteran who is unable to work any more, and these payments each month is causing us undue hardships, and would like for you to consider waiving the balance due. Don't laugh, as it has been done before.


Papa

[Pete53]

I got lump sums from Social Security and VA several times in fact when I owed IRS a lot of money. Never had a problem but I understand your worry. If you are up to date with your payment plan I don;t think that you will have a problem.

I still resent that the IRS treated me horribly and most of my so called debt arose from penalties and interest on money that I save when working and for most part had paid taxes once but was penalized for using the money to live on.

However I still got my money drawn down and had it replaced with cashiers checks just in case.

Every few years I write the President and ask if our government could consider some kind of tax amnesty for disabled but get nothing but polite responses. My reasons are simple not many disabled are ever able to return to work and why should they have to worry about the IRS when they have limited income.

[westcoastlv]

Thanks Papa and Pete. Ok, so I understand that the IRS cannot go directly to the VA and request the money be sent to them. However, wouldn't the direct deposit be no different than my paycheck being direct deposited? They don't fool with that.

I think the best solution will be to request the first payment in a check (if they will do that). Then open a new account for the monthly payments.

I just don't trust the IRS and if they make a mistake and take the money, I will probably have no luck at all getting it back.

Thanks everyone for the comments, I just need to make sure they honor their side of the bargain and not try to screw us (again)

[Chuck75]

The problem with direct deposit is that in order to be able to correct an "incorrect" transaction, the depositor is automatically given the ability to also withdraw. The banking laws, etc. set forth the details.
As a result, the check is "safer", in that if the check issuer screws up, and issues a check in an improper amount, the laws concerning checks place most of the burden on the issuer.
Remember that the government, if it chooses to do so, can easily identify each and every account held by and individual. All you can do is make the task a little more involved.
There are ways to sometimes get IRS debts reduced or "forgiven". It's just that dealing with the IRS directly usually does not get the job done.

Thanks Papa and Pete. Ok, so I understand that the IRS cannot go directly to the VA and request the money be sent to them. However, wouldn't the direct deposit be no different than my paycheck being direct deposited? They don't fool with that.

I think the best solution will be to request the first payment in a check (if they will do that). Then open a new account for the monthly payments.

I just don't trust the IRS and if they make a mistake and take the money, I will probably have no luck at all getting it back.

Thanks everyone for the comments, I just need to make sure they honor their side of the bargain and not try to screw us (again)

[COOL BREEZE]

"The IRS cannot seize the benefits to pay a tax debt under that law." I really don't think this will protect you and your husband. What this means is that the IRS can not go directly to the VA and tell them that this Veteran owes back taxes, and we would like for you to sent us a check instead of to the Veteran. They can not do that, but once it is direct deposited into your bank account, the IRS may have the lawful means of obtaining the funds. However, what I would do is go to your local IRS office and plainly ask them will they go after my husbands VA disability lump sum to pay off these taxes? Another thing you may want to consider is the kind of interest and penalties charges you are paying on these back taxes by paying a certain amount each month. Another thing I would do at the IRS office is tell them that my husband is a disabled Veteran who is unable to work any more, and these payments each month is causing us undue hardships, and would like for you to consider waiving the balance due. Don't laugh, as it has been done before.


Papa

How would the IRS know you just received a lump settlement from the VA unless you told them? I am now in that ugly situation with the IRS, and I plan on doing a payment plan with them. Also plan on keeping my lips sealed about anything that is none of their business. As far as I know, as long you make your payments every month, they have no business checking your bank account and taking what they feel like. If they did, I would probably take them to court and make 1 helluva of federal case out of this!

[Papa]

Cool Breeze,

Banks are required to send to the IRS certain information like interest income, and if want they can also have a look at our accounts. I agree, it is not right. Also, these payment plans are not a right, as I have had clients turned down for payment plans. The IRS basically is like the VA, they can do whatever they like to screw you, and you don't want to piss them off since they can do more damage to you than you to them.

Papa

[Pete53]

If you have not already signed an agreement with the IRS and they are not doing anything all that active you might consider waiting them out.

For me the IRS took no enforcement except the threats and intimidation but after 10 years dropped the liens and forgave the taxes I owed. It was over 70,000.

I think that you really need to talk to someone who knows what is going on the IRS certainly won't tell you and if you make an offer in compromise or sign and agreement they start a new clock for another 10 years. Yes I lost every refund which was ours and paid a lot of miscellaneous but t never was the full amount.

I am not giving advice I am sharing what happened to me.