IRS Tax Levies and Liens

If you’ve just received an IRS tax levy or lien notice and you’re wondering what you can do about it, please read on. Many people confuse levies and liens , but they are two different animals. 

A levy is a legal seizure of your property to satisfy a tax debt, such as the funds in your bank account, wages out of your paycheck, or 100% seizure of your accounts receivable payments.

• A bank levy takes any funds available out of your account which can lead you to bouncing checks and online payments.   Bank levies can occur repeatedly at the will of the IRS.
• Wage Garnishment, sometimes called a wage levy, is continuous paycheck to paycheck, until the debt is paid in full or you come to terms with the IRS on a payment plan.
• Social Security tax levies can take 15 to 25% of your monthly payments.
• Accounts Receivable tax levies can stop you from being able to meet payroll or buy products for your business.

 A lien freezes any title to owned property and places the IRS in front of any other creditor you may have. You will likely not be able to refinance your home, obtain a loan, or sell the property without first paying the IRS. 

Both tax levies and liens are bad news for taxpayers.  Fortunately, ASAP Tax Relief can help. Call or contact us now at 1-855-375-5400 and one of our Tax Specialists will provide you a free, no-pressure, consultation on how to stop tax levies.  (We don’t have salesmen, just trained tax professionals eager to help you.)  Or, keep reading and we’ll tell you more.

 

More About Tax Levies and Liens

Tax Levies

Tax levies may take two forms, but the result is the same: 1) a forfeit of property in your possession, or 2) a forfeit of your rights to certain property that is held by others.  Your forfeited property will be used to pay down or pay off your back tax debt. Property in your possession may include your home, vehicle, boat, or business assets. Property that is rightfully owned by you but held by others includes your wages, retirement account, certificate of deposit, money market account, bank account, professional licenses, rental income, accounts receivables, 1099 income, commissions, and any cash value instruments such as the loan value on a life insurance policy.

Scary stuff, no doubt.  While individual taxpayers are likely to see bank or wage levies, businesses are more susceptible to seizure and sale of their assets.  Liquidating certain business assets is not the same as depriving someone of their primary residence. Even so, for the business owner, the IRS would only look to liquidate excess or non-essential assets that should not impede business operations. Taxpayers’ homes, on the other hand, are usually only seized in cases of fraud or criminal activity.

Seizure of rights to property is much more common, the top two being wage garnishments and bank levies.  The intent is to grab your attention and is this is usually very effective. The IRS notification process is via U.S. mail to the last known address. It is the taxpayer’s responsibility to update the IRS with current address information.  So if you do not receive an IRS notice, either through mishap or misinformation, you will certainly take note when money is frozen or withdrawn from your bank account, or your employer advises that the IRS has attached your wages. Not only is this embarrassing, but it can cause problems with other creditors as well when they go to debit your bank account and it is empty or frozen.

If the IRS attaches account receivables for a business owner, the business will have to pay the IRS first for all money normally coming in to pay other expenses.  The IRS can also levy business bank accounts.  It may take a lot of negotiation with the IRS to release even a portion of the frozen funds for payroll and other necessary operating expenses.

Tax Levies can be released by full payment of the tax debt; negotiation of an IRS approved payment plan; or IRS agreement that continuing the levy will cause you an undue hardship.

Tax Liens

A tax lien is simply a claim to property by securing payment of a tax debt if that asset is sold or liquidated. In essence, the IRS makes themselves your primary creditor to the attached property (as opposed to your mortgage or loan company). A lien will likely affect your credit report. If you have a federal lien, you may not be able to qualify for a car loan, home loan, or credit card.  The lien simply resides on your credit report to show its’ claim on your property. If the property is sold at a gain, the tax lien is paid in whole or in part from the gain. If you are selling the property at a loss, you may request a discharge of the lien to accommodate the sale. Also, a temporary subordination of the Federal Tax Lien may be possible if you are trying to refinance or restructure a mortgage.

In some professions where personal credit affects the business or ability to conduct business (such as partners in law firms or real estate developers) the lien can jeopardize one’s position and business prospects. This is not intentional, and for these reasons, the IRS will consider releasing a lien either temporarily or permanently on a case by case basis.

In Summary to Tax Levies and Liens

In most situations to get tax levies released, the IRS requires filing of all previously unfiled tax returns and the submission of an acceptable tax resolution plan. The IRS will only resolve the entire scope of your liability, not just one year or another.

An acceptable tax resolution plan is either the establishment of an installment payment plan, or providing the IRS with three months of current financial information for qualification purposes. All resolution programs with the IRS have to be qualified for your unique circumstance to determine your ability to pay the back tax debt; provide proof that the debt cannot currently be paid (hardship cases); or determine that the debt can be paid, but not in full.

The Tax Specialists at ASAP Tax Relief can help in advising and implementing a course of action that will resolve your underlying tax problems so that the tax levies or tax liens gets released.  There are a whole range of options that may be available to you.  Fill out our Free Consultation form or call us at 1-855-375-5400 to speak with a Tax Specialist on how to stop tax levies. 

 

Call Now for a Free Confidential Consultation: 1-855-375-5400.