Taxpayers who are not initially able to pay their taxes can first expect to receive some notices in the mail, along with a set of instructions explaining their rights as taxpayers. Many times, an IRS Seizure can be resolved with an installment plan using Form 9465 or going online (IRS website). However, taxpayers who owe large balances on their tax returns and refuse to communicate with the IRS will eventually face the possibility of having a tax lien or tax levy (wages – paycheck – bank account) placed on some or all of their property. Here’s how this process works and how it can be avoided.
Tax Liens – A federal tax lien is a public notice that someone owes back taxes to the IRS. It gives the IRS the authority to seize any proceeds from sales of any real estate/property by a delinquent taxpayer. The rules pertaining to tax liens are outlined in Section 6321 of the IRS Code. Tax liens prevent delinquent taxpayers from selling their property with a clean title until the IRS has been paid in full or the IRS agrees to subordinate the lien. Furthermore, the tax lien follows the property and not the taxpayer/owner, which means that anyone unlucky enough to buy the asset from the taxpayer will inherit the tax lien as well. Then the IRS has two people that it can go after for its money. Now do you see how this works?
There are two types of tax liens; one is a “silent automatic tax lien” and the other involves a notice sent from the IRS to the recorder’s office of the taxpayer’s county of residence. The latter type of lien is listed by the various credit reporting services and will have a substantial negative impact on the taxpayer’s credit score. The only way that a tax lien can be released is via payment in full, plus interest and penalties, discharging the tax debt in bankruptcy or an Offer in Compromise. If the enforcement time has expired (Statute of Limitations) for tax collection expires, then that can also release the tax lien.
Appealing and Avoiding a Tax Lien – Taxpayers can protest a tax lien with the IRS Office of Appeals. Should you decide to try this on your own, you will need to contact the manager of the unit that is filing the tax lien first. If that does not prevent the tax lien, then they must send Form 9423, the Collection Appeal Request, to the collection office. An appeals officer will decide the taxpayer’s case within five business days. However, it should be noted that these steps will seldom prevent a tax lien. Taxpayers who receive notices of liens should contact the IRS Taxpayer Advocate immediately and do their best to convince them (remember this, they are still the IRS) that posting the tax lien is not in their best interest, because it will reduce your credit score and thereby interfere with your ability to pay your tax debt by means such as a loan.
A Tax Levy (IRS Garnishment)- If the IRS is not able to recover unpaid taxes with a tax lien, then the next step is to levy the taxpayer’s assets. A tax levy is the actual seizure of taxpayer assets (wages, paycheck, bank account, rental income, etc.) by the IRS. This is the final method of enforcement of taxation when all other attempts to collect taxes have failed. Tax levy notices are usually issued to the employers and financial institutions of delinquent taxpayers.
The rules and procedures for a tax levy on an asset are outlined in Section 6330 of the Internal Revenue Code. The IRS must provide the taxpayer with a written notice of intent to levy along with an explanation of the right to appeal at least 30 days before taking action. Please note, the IRS can send the Notice of Intent to Levy and the Notice to Levy to any address that they have on file for you. If you have moved at any time, the IRS notice could have been sent to an old address. Furthermore, the IRS only has to sent the Notice to Levy once.
THE TAX PROFESSIONALS ROUTINELY HAVE A TAX LEVY
IRS SEIZURE STOPPED IN ONE DAY.
Taxpayers can try to head off this action by negotiating with the IRS and setting up a payment plan or selling off an asset. An Offer in Compromise can absolutely work here too, but more drastic measures such as bankruptcy or changing employers may also be necessary. THE TAX PROFESSIONALS AT FLAT FEE TAX SERVICE DO NOT RECOMMEND THAT A TAXPAYER QUIT THEIR JOB. IT IS TOTALLY UNNECESSARY.
There are also situations where taxpayers can gift or transfer certain assets to other family members in order to prevent them being seized by the IRS. Putting paper assets into safe deposit box with their own tax ID number can often keep them out of reach. Taxpayers can also try to show the IRS that an asset being seized has little value. But the most effective strategy when dealing with a tax levy is to convince the IRS that the IRS garnishment will directly create a financial hardship that will only make it more difficult to pay the tax.
I am Dave Rosa. For more than a decade it has been my pleasure and duty to provide taxpayers with a comprehensive tax relief consultation. Our conversation will only take 20 to 30 minutes. This will be well worth your time.
The Bottom Line – The IRS has enormous power to issue tax liens and/or a tax levy against taxpayers who refuse or neglect to pay their tax debt. Taxpayers have rights during these proceedings. There are many strategies that can be used to try to prevent or delay the IRS from seizing personal as well as business assets. For more information, give our tax professionals a call.
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