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 lien is issued against property when a taxpayer has tax debt. In some cases, the taxpayer has simply neglected to pay the tax. Or, there is a dispute of some nature. Consequently, the taxpayer refuses to pay. Put another way, a lien is the federal 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. As mentioned above, creditors are notified of the lien, so your ability to receive credit is compromised. A lien is attached to all your assets, from cars and securities and business assets and business property. However, a lien does not affect your right to sell or transfer property. Filing for bankruptcy? The lien may stay with you, depending on the specifics of your case.
If you do not pay your debt after receiving a lien within a certain period of time, a levy will be issued.
The IRS issues a levy to seize and sell property to satisfy an unresolved debt obligation. 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 10 days – before the sale takes place. Any money that is left after the sale of property will be refunded to the taxpayer.
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, at 972-818-5300.