Liens, Levies, and Garnishments
What is an IRS Lien, Levy, or Garnishment?
- An IRS Tax Lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The tax lien protects the government’s interest in all of your property, including real estate, personal property,
and financial assets.
- An IRS Levy is a legal seizure of your property to satisfy a tax debt.
- An IRS Garnishment is a levy or seizure of your wages.
The Federal Tax Lien
The first step in the IRS’s collection process is usually the imposition of a tax lien, which is placed as an encumbrance on the taxpayer’s property to secure payment. After the IRS assess your tax liability and sends you a Notice and Demand for Payment, the IRS may file a Notice of Federal Tax Lien with the county’s clerk and recorder. A federal tax lien is a publicly recorded document to alert creditors and others that the government has a legal right to your property.
IRS Tax Levy
After a lien is in place, the next step is often an IRS levy (i.e. seizure) of assets for paying the outstanding taxes. Generally, the IRS will levy bank accounts, seizing all available funds without notice. If you neglect to pay a tax after receiving a Notice and Demand for Payment, the IRS may send you a Final Notice of Intent to Levy. This must be provided at least 30 days before the IRS seizes your property. The IRS is not limited to seizing the assets or funds in your possession (i.e. your personal bank account). The IRS can levy any property that is yours, even if it is held by someone else, such as earned but unpaid wages, retirement accounts, dividends, rental income, accounts receivable, commissions, and the cash loan value of your life insurance.
If collections continue long enough, the IRS may eventually garnish the taxpayer’s wages for payment taking a portion of the taxpayer’s wages every pay period until the taxes are paid in full. Part of your wages are exempt from garnishment and will be paid to you. This amount is based on the standard deduction and number of personal exemptions you are allowed. If the IRS garnishes your wages, it will mail IRS Publication 1494 to your employer with an explanation on how to calculate your exempt earnings. Your employer must provide you with a Statement of Exemptions and Filing Statute to complete within three days. If you fail to return the completed statement in three days, your employer is required to calculate your exempt earnings as if you are married filing separately with only one exemption. In most cases, failing to return the completed statement will result in the IRS garnishing a a greater amount of your wages than it would otherwise be entitled to receive.
How to Respond to an IRS Lien, Levy, or Garnishment
In all cases, the IRS will provide notice before issuing a lien, levy, or garnishment. If you have received such a notice, it is imperative that you respond promptly and appropriately. There are a number of steps that a competent tax attorney can take to prevent or limit the IRS’s collection efforts once you receive a notice. However, once a lien, levy, or garnishment is in place, it becomes harder to obtain the same relief. If you are currently under an IRS lien, levy, or garnishment, or have received notice of a lien, levy, or garnishment, call the tax attorneys of the Business Law Group today! Do not delay.
Call the Colorado Tax Attorneys at the Business Law Group
The tax attorneys of the Business Law Group can help you respond to, navigate, and resolve IRS liens, levies, and garnishments, allowing you to focus on the important things in life. Call us today!