Landmark Tax Group

Tax Tips

The Secret to Protecting Your Intangible Assets

One of the most important factors in building and maintaining a successful business is protecting and securing intangible assets. For some businesses, the value of intangible assets is greater than the value of tangible items such as computers and equipment and unfortunately, the value of these intangible assets is not recognized until it is too late. The best thing you can do as a business owner or individual taxpayer is to take the steps to protect your intangible assets as early as possible.

What are Intangible Assets?

Intangible assets are resources you own without physical nature. These assets cannot be touched or seen even though money may have been paid to purchase them. According to the IRS, intangibles include things such as:

  • Goodwill
  • Workforce in place
  • Business books and records, operating systems, or any other base, including lists or other information concerning current or prospective customers
  • Patents, copyrights, formulas, processes, designs, patterns, know-how’s, formats or similar items
  • Customer-based intangibles
  • Supplier-based intangibles
  • Licenses, permits, or other rights granted by a government unit or agency
  • Non-compete covenants entered into in connection with an acquisition of an interest in a trade or business
  • Any franchise, trademark, or trade name
  • Contract for the use of, or a term interest in, any item listed above

Since intangible assets aren’t typically physical, it can be difficult to assign them a value. While intangible assets are not always included in the general definition of an asset, they are still very important and need to be accounted for properly. For tax debt purposes, intangible assets are among the properties the IRS can seize when you have unpaid tax debt.

In order to satisfy tax debt, the IRS can levy permits to seize your property and assets. Levies and seizures are authorized by the Tax Code and the results can be devastating. The IRS can garnish your wages, take money from your bank account, and seize your vehicles, real estate and other personal property including intangible assets.

Seizures are often a “last resort” action by the IRS, which allows you plenty of time to resolve the dispute without any of your assets actually being seized. However, the best way to protect yourself from losing your assets (both tangible and intangible) is to be proactive and secure protection.

In general, how do you protect Intangible Assets?

As a business owner or individual taxpayer, you want be to sure your assets are safe from any future liens or levies. As we mentioned above, the best way to do this is to be proactive.

Identify Intangible Assets

In order to properly protect your intangible assets, you must first identify what they are. As we mentioned above, intangible assets include patents, trademarks, copyrights and customer lists, but there are more. Think about the things that make you special and help create your business. This can include the service you provide, the uniqueness of your product and the results you can achieve. Once you’ve identified your intangible assets, you can work with the necessary legal entity to protect them.

File Documents Properly

One of the most common mistakes individuals make is incorrectly filing tax paperwork. IRS forms can be very complicated especially when you’re managing multiple assets. Consulting with a tax attorney can help you manage your IRS paperwork and ensure you’ve filed everything correctly to avoid debt collection.

Document Changes during Amortization

The amortization of intangible assets is the process of consistently reducing the recorded value of the asset over time. It basically refers to the write-off of an asset over its expected life. Once the amortization process begins, it is rarely altered unless there is proof that the value of the intangible asset has lessened. If a change does occur, it is immediately documented and then you must determine if the useful life of the asset has changed. These changes are examined as part of annual audits so it is extremely important to document any changes to value of your intangible assets.

If the IRS is attempting to collect tax debt, how do you protect Intangible Assets?

If you have received notification from the IRS that they intend to levy or seize your assets, there are certain actions you need to take to protect yourself and your assets.

Review all IRS Paperwork

As we mentioned above, IRS documents can be very complicated. Make sure that you save all bills, letters, notices and publications from the IRS. It’s important to understand how much the IRS thinks you owe and why. If you do not understand the information sent to you by the IRS, consider contacting a tax attorney to help.

Determine if the Amount Owed is Correct

Whether you decide to work with a tax attorney or not, you need to determine if the amount the IRS is claiming you owe is correct. It is not uncommon for the IRS to make a mistake. For example, if you’re married and your spouse owed from a previous year, the accumulated tax debt may be added to your tax liability. Review the IRS assessment as soon as possible and determine if the information is correct.

Pay Tax Debt or Work Out a Payment Plan

If the IRS assessment is correct, you can either pay the amount listed on the IRS notice in full or work out a payment arrangement. Several payment plans exist, but again, the details can be complicated. If you owe a large amount of tax debt, consider working with a professional to secure the best payment plan for your situation and protect your assets in the process.

If you find the amount you owe is incorrect, complete and file the appropriate IRS forms for your situation. Most of the paperwork you receive from the IRS will provide clear instructions if you disagree with the IRS’s determination of how much you owe.

Hire a Professional

One of the easiest ways to protect your intangible assets and yourself is to work with a professional to ensure your case is being handled correctly. Contact us today at 1-714-382-6780 for a FREE, NO-OBLIGATION tax analysis to help reduce your chance of an IRS levy or seizure.