Liens. Levies. Do you know the difference? If not, you’re in good company. While no taxpayer wants to hear from the IRS about either one, it’s worthwhile to understand what the terms mean and what action the IRS can take. Let’s start by defining each term.
A Federal Tax Lien is issued against property when a taxpayer has tax debt. In some cases, the taxpayer has simply neglected to pay the tax. In other cases, there is a dispute about the liability, or the taxpayer is simply unable to pay the debt. A Federal Tax lien is the government’s way of protecting its interest in your property, whether it is real estate, personal property, or financial assets.
It is worth noting the various ways a lien could affect you. Creditors are notified of the lien, so your ability to receive credit is compromised. Most liens attach to a specific piece of property. A Federal Tax Lien, on the other hand, attaches to all your assets, including cars, securities, and business assets. A lien does not necessarily prevent you from selling or transferring your property, but it can make it difficult to find a buyer. In the case of real estate, any proceeds from the sale might go to the IRS. Filing for bankruptcy? The lien may stay with you, depending on the specifics of your case.
The IRS issues a levy to seize property to satisfy unpaid tax liabilities. A levy applies to any type of property, as detailed above, whether you own or have an interest in the property. The government has the authority to seize your car, garnish your wages or take funds from your bank accounts. Before the IRS seizes property, it is required to follow a number of steps, including the calculation of a minimum bid price. Taxpayers have the right to challenge the price. Once the IRS provides public notice of the sale, there is a brief waiting period – typically ten days – before the sale takes place. Any money that is left after the sale of property will be refunded to the taxpayer, assuming the tax liabilities have been paid in full.
It is important to also understand what happens if a levy is issued against one of your employees, customers or other third parties. To learn more, please read the IRS guidelines here.
There are a number of steps you can take to resolve your tax liability and – if it gets to that – request a seizure release. A qualified CPA with expertise in IRS defense matters can explain each step of the process and help you resolve IRS debt challenges before they get too far.
Questions about liens, levies or other IRS matters? Learn more about the IRS Representation and Defense Services Group at Goldin Peiser & Peiser. Call Rick Lahr, CPA, or Naveid Jahansouz, Esq. at 972-818-5300.