TRA '97: relief for some; more aggravation for others.
With all the talk of tax cuts in the Taxpayer Relief Act of 1997 (TRA TRA Training
TRA Tennessee Regulatory Authority
TRA Telecommunications Regulatory Authority (Oman)
TRA Tax Reform Act (1976, 1984, or 1986)
TRA Teachers Retirement Association '97), nobody is discussing the new powers given to the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. to collect taxes due. The TRA '97 substantially changes the rules on collection (the two major changes are discussed below), benefiting the Service at taxpayers' expense.
1. Under prior law, the following property was always exempt from levy:
a. worker's compensation (Sec. 6334(a)(7)).
b. annuities or pension payments under the Railroad Retirement Act The Railroad Retirement Act is a federal law (45 U.S.C.A. § 231 et seq.) enacted by Congress in 1937 that provides a special system of Annuity, Pension, and death benefits to railroad workers. and benefits under the Railroad railroad or railway, form of transportation most commonly consisting of steel rails, called tracks, on which freight cars, passenger cars, and other rolling stock are drawn by one locomotive or more. Unemployment Insurance Act (Sec. 6334(a)(6)).
c. unemployment benefits (Sec. 6334(a)(4)).
d. means-tested means-test
v. means-test·ed, means-test·ing, means-tests
1. To apply a means test to or require a means test for (a governmental program, for example).
2. public assistance payments (Sec. 6334(a)(11)).
Under the TRA '97, the properties listed are subject to levy. Therefore, delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent.
DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. taxpayers will need to respond (with assistance from their accountants) to IRS requests for information to avoid a levy.
Note: New Sec. 6331(h) provides for levy on these items only with the approval of the Secretary; see Sec 6334(f). Therefore, a collection agent should not impose the levy without prior approval of the Secretary. An accountant dealing with a collection agent should request written verification of this approval.
2. Under prior law, except for wages and salaries, a levy was a one-hit item (Sec. 6331(b)); thus, it did not apply to property acquired after the date of its issuance. This has been significantly changed, with new Sec. 6331(h)(1) providing for a continuous levy on a "specified payment."
The definition of "specified payment" is somewhat limited, however Under new Sec. 6331(h)(2), a specified payment is defined as:
a. items under Sec. 6334(a)(4), (7), (9) or (11), including worker's compensation payments, unemployment benefits, wages/salary, supplemental security income Supplemental Security Income
A Social Security program established to help the blind, disabled, and poor. , and needs- or income-tested public assistance;
b. annuity annuity: see insurance.
Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. and pensions under the Railroad Retirement Act and benefits under the Railroad Unemployment Insurance Act (partially repealing Sec. 6334(a)(6)); and
c. other Federal payments--not based on income or assets.
Sec. 6331(h)(2)(A) is very specific; the payments must be made by the Federal government and not under a general assistance program. The TRA '97 Committee Report gives Social Security payments as an example.
Of particular importance is that the items listed above are only subject to a continuous levy of "15% of any specified payment due to the taxpayer" (Sec. 6331(h)(1)). Therefore, tax practitioners need to review the amount of funds taken by the Service, to determine whether the levy is in excess of 15%. There is no indication in the law or Committee Report as to how this 15% is to be calculated--gross payment or net payment after deductions. Hopefully, regulations will clarify this issue.
Interestingly, the Committee Report discusses the continuous levy on other "federal payments" without reference to the 15% limitation. However, Sec. 6331(h)(1) refers directly to "specified payments" and these "federal payments" are defined under "specified payments." Therefore, any continuous levy should be limited to 15% of Federal payments such as Social Security. In the event the IRS attempts a 100% levy on Federal payments, practitioners should be aware of the Committee Report's language.
After the TRA '97, there is much less protection for taxpayers against the Service's collection efforts (although the clothes on a person's back are still protected under Sec. 6334(a)(1)). With these changes, even basic funds for living expenses, such as public assistance and Social Security, are subject to levy However, a tax adviser can help clients by reviewing the levy documents to be certain that the levies on specified payments were approved by the Secretary and do not exceed the 15% statutory amount. Hopefully, this will give some protection to a client while the practitioner negotiates with the IRS, short of filing an immediate petition for bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most protection.
From Robert Robert, Henry Martyn 1837-1923.
American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876).
Noun 1. M. Singer, Esq., Hamden, Conn. (not affiliated with AFAI AFAI American Family Association of Indiana )