Tax liens and levies are used by the IRS and the States Departments to collect unpaid taxes. A tax lien is a legal claim against your properties to secure payment of your tax debt, while levy actually takes the property to satisfy the tax debt. When you owe taxes to the U.S. Treasury and don’t pay, a claim against you arises by law (Internal Revenue Code § 6321).
Once the lien is filed, it is to alert the other creditors that the IRS has a claim against your assets. The existence of the government’s claim is not public information initially and is called a “secret” or “statutory” or automatic lien.
A lien is placed against all current and future properties such as a house, car, bank account, wages, salary, bonus, commission. The taxpayer does have certain rights. Generally, before the property is seized, the IRS will send you a Notice of intent to levy and right to a hearing. A taxpayer generally has 30 days to respond from the date notice was mailed. If taxpayers do not respond to the notice within that time, the IRS may seize the property. The taxpayer also has the right to hire an EA, CPA or attorney to represent the taxpayer in dealing with the tax issues. The taxpayer may choose that not to appear in meetings with the taxing authorities.
Steps to take if a Notice Federal Tax Lien is filed against you:
- Do you have unpaid taxes due and previously received notices from the taxing authorities or unfiled tax returns for previous years? This information is important because sometimes a levy could be filed due to wrongful and erroneous levies.
- In either case, this is a time sensitive issue and you need to respond. If you do not respond within 30 days, you will lose appeal rights.
- The Notice of federal tax lien will only show your assessed balance as of the date of the notice filing. It does not show payoff balance or include the charges for filing and releasing lien.
- If you can not pay the whole amount, based on your specific situations, the IRS will consider alternative plans like: installment payment plans (full or partial payment plans), offer-in-compromise (the IRS agrees to receive less than full amount) or uncollectable at present time based on financial situation.
If you or someone you know has additional questions regarding filing past due taxes, tax payments, levies and Liens business expenses tracking or other tax related matters, give me a call or send me a message.
Many tax preparers and accounting professionals are extremely busy due to the complexity of tax regulations brought about by the COVID-19 pandemic and the IRS collection efforts to contact taxpayers with unfiled tax returns. If you or somebody else you know are having IRS issues please feel free to contact me at firstname.lastname@example.org or call me 301-461-2022. The IRS doesn't like to be ignored. Be proactive.
Enrolled agents are federal tax practitioners licensed by the Treasury Department.