What is a "Tax Lien"?
A Tax Lien is a type of Collections action that the IRS frequently uses to force a taxpayer into payment of a tax debt. A Lien is essentially a claim against the assets of a taxpayer who is in arrears with the IRS or a State taxation agency, and signals to his or her creditors that this person has a preexisting debt to that agency which must be satisfied before the Lien assets will be returned to the taxpayer's complete control. Although the affected assets are technically still owned and usable by that taxpayer, the Lien will act as a roadblock to prevent the sale or transfer of the property as long as the tax debt exists. This includes property acquired after the Lien has been filed. Only when the debt has been satisfied in full, will the Tax Lien be removed. A Notice of Federal Tax Lien will be filed by the IRS after they have assessed the liability, sent the taxpayer a demand for payment, and had that demand refused or neglected. After 10 days from the time of notice, the Lien will go into effect. A Tax Lien attaches to all physical property (such as real estate, automobiles, etc.) and also to any rights to property that the taxpayer may hold (a business's Accounts Receivable, for instance.) An IRS Tax Lien will cause serious damage to a person's credit rating and may eventually lead to asset seizure. If you have received a Notice of Federal Tax Lien, please contact us right away, so that we can immediately address the tax problem that led to the Lien in the first place and start you on the road to a resolution.
The Biggest Mistakes By Taxpayers?
A) Not filing a tax return
By not filing a tax return, you are subject to failure to file penalties and interest on amounts that you owe. Therefore always file a return even if you are unable to pay. This step will reduce and in some cases eliminate the failure to file penalties and in the long run reduce
how much you have to pay to the IRS.
B) Failure to respond to tax agency correspondence
Ignoring letters from tax agencies can result in tax liens, wage garnishments and loss of some your tax code rights.
What is the "IRS Tax Levy"?
An IRS Levy is another form of Collections action similar to a Lien, except that whereas a Tax Lien is a declaration that the IRS has a claim on a taxpayer's assets due to a tax debt, a Tax Levy is effectively a seizure of certain assets in order to satisfy that tax debt. A Levy is most frequently placed on relatively liquid assets, such as bank accounts and securities, but the IRS can and will sometimes Levy real and physical property, such as a taxpayer's house, car, boat, etc. In addition, the IRS may also Levy a person's wages and/or a business's Accounts Receivable. In the case of a Wage Levy, the IRS will contact the payroll department of the taxpayer's employer and request that they withhold a portion of that taxpayer's wages or salary and pay it directly to the IRS instead - and the employer has no authority to refuse.
The IRS will issue a Levy only after they have assessed the liability and sent the taxpayer a Notice and Demand for Payment; if the taxpayer subsequently neglects to respond or refuses to pay, then a Notice of Intent to Levy is sent at least 30 days before the Levy goes into effect. This notice acts as a final warning. If the 30 days lapse without the debt having been repaid, the Tax Levy takes effect. When the IRS Levies a bank account, the bank is obligated to place a hold on the funds for 21 days, after which the money must be sent to the IRS as payment against the tax debt.