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Tax Liens and Levies

The Internal Revenue Service (IRS) has extensive collection powers. Two of the more common tools that the IRS uses are tax levies and tax liens.

A tax levy is a legal action where the IRS seizes your property to satisfy a tax debt. A tax lien, however, is a legal claim against your property to secure the payment of a tax debt. A tax lien is like a mortgage secured against your home. Thus, through a tax levy the IRS seizes your property.

1. How Do Tax Levies Work?

A tax levy is a collection action. The IRS will not take this action unless you have been accessed a tax and sent a Demand for Payment. After serving the Demand for Payment, the IRS will sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least thirty (30) days before the levy occurs. If the Final Notice is ignored (i.e., payment arrangements are not made) then the IRS will likely levy your property.

2. What Types of Property Can the IRS Levy?

The IRS can levy many different assets. However, the most common types of property that are levied are:

• Bank accounts – both savings and checking accounts
• Retirement accounts
• Wages
• The cash value of your life insurance policy
• Accounts receivable
• Rental income
• Dividends
• Tangible assets like your car or house

Certain types of assets are protected from IRS levies, including:

• Household items
• Unemployment and workers compensation benefits
• Tools of the Trade (i.e., construction tools)

For more information on assets exempt from levies see 26 U.S.C. 6334. So, while the IRS cannot take all your assets through a tax levy, they can take most. It is important to act as quickly as possible following the receipt of a formal Demand for Payment.

3. How do Tax Liens Work?

A tax lien protects the government’s claim for unpaid taxes. Like a tax levy, prior to issuing a tax lien the IRS must access the tax and send you a Demand for Payment. If payment arrangements are not made, the IRS will file a Notice of Federal Tax Lien. This is a public document and can be embarrassing for some taxpayers as it will be published in the local newspaper. Tax liens are most commonly attached to real estate, but also other personal and business property, and even bank accounts. Tax liens can prevent you from selling the asset that the lien is attached to.

4. What Should I do if I have an IRS Tax Lien or Tax Levy

The most important thing is to be proactive. If you have received a Demand for Payment, it is important to come to an agreement with the IRS. In addition to installment payment options, it may be possible to settle the debt for less than you owe (known as an “Offer-in-Compromise”) or even receive a temporary deferment. If you do nothing, however, you risk the IRS freezing or taking your assets. If you are facing a tax lien or tax levy our experienced tax defense professionals can assist you. Please contact us today for a free consultation.

5. The Taxpayer Roadmap

This illustration of the modern US tax system at a very high level view shows the processes to get answers to your questions from filing to litigation. This illustration provided by the tax payers advocate service shows the complexity of the stages required to get answers to solve your tax issues. If you would like some help navigating through this process we are the experts you need to have on your side! Please contact us at 800-TAX-4200 to speak with one of our team specialist for a no cost or obligation review.

Tax Liens and Levies

The Internal Revenue Service (IRS) has extensive collection powers. Two of the more common tools that the IRS uses are tax levies and tax liens.

A tax levy is a legal action where the IRS seizes your property to satisfy a tax debt. A tax lien, however, is a legal claim against your property to secure the payment of a tax debt. A tax lien is like a mortgage secured against your home. Thus, through a tax levy the IRS seizes your property.

1. How Do Tax Levies Work?
A tax levy is a collection action. The IRS will not take this action unless you have been accessed a tax and sent a Demand for Payment. After serving the Demand for Payment, the IRS will sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least thirty (30) days before the levy occurs. If the Final Notice is ignored (i.e., payment arrangements are not made) then the IRS will likely levy your property.
2. What Types of Property Can the IRS Levy?

The IRS can levy many different assets. However, the most common types of property that are levied are:

• Bank accounts – both savings and checking accounts
• Retirement accounts
• Wages
• The cash value of your life insurance policy
• Accounts receivable
• Rental income
• Dividends
• Tangible assets like your car or house

Certain types of assets are protected from IRS levies, including:

• Household items
• Unemployment and workers compensation benefits
• Tools of the Trade (i.e., construction tools)

For more information on assets exempt from levies see 26 U.S.C. 6334. So, while the IRS cannot take all your assets through a tax levy, they can take most. It is important to act as quickly as possible following the receipt of a formal Demand for Payment.

3. How do Tax Liens Work?
A tax lien protects the government’s claim for unpaid taxes. Like a tax levy, prior to issuing a tax lien the IRS must access the tax and send you a Demand for Payment. If payment arrangements are not made, the IRS will file a Notice of Federal Tax Lien. This is a public document and can be embarrassing for some taxpayers as it will be published in the local newspaper. Tax liens are most commonly attached to real estate, but also other personal and business property, and even bank accounts. Tax liens can prevent you from selling the asset that the lien is attached to.
4. What Should I do if I have an IRS Tax Lien or Tax Levy
The most important thing is to be proactive. If you have received a Demand for Payment, it is important to come to an agreement with the IRS. In addition to installment payment options, it may be possible to settle the debt for less than you owe (known as an “Offer-in-Compromise”) or even receive a temporary deferment. If you do nothing, however, you risk the IRS freezing or taking your assets. If you are facing a tax lien or tax levy our experienced tax defense professionals can assist you. Please contact us today for a free consultation.

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