IRS Liens and Levies
What you Need to Know
If you’ve received a notice from the IRS that your property has a lien on it, you’re going to want to know the details of this process.
What’s the difference between a lien and a levy?
- A lien secures the government’s interest in your property.
- A levy takes your property and can be either “one-time” or continuous. A continuous levy remains in place until the IRS releases the levy or your debt is paid in full.
Federal Tax Liens
Once again, a federal tax lien is a legal claim to your property, including property that you acquire after the lien arises. The federal tax lien arises automatically when you fail to pay in full the taxes that have been assessed against you within ten days after the IRS sends the first notice of taxes owed and demand for payment.
The IRS may also file a Notice of Federal Tax Lien in the public records, which publicly notifies your creditors that the IRS has a claim against all your property, including property acquired by you after the filing of the Notice of Federal Tax Lien.
Once a lien arises, there are generally four ways to get rid of it:.
- Pay your bill in full
- Apply for a Certificate of Discharge
- Apply for a Certificate of Subordination
- Apply for Withdrawal of Federal Tax Lien
In the event of a Federal Tax Levy, the IRS seizes wages, bank accounts, stocks, bonds, cars, trucks, boats, and even social security checks. They do this regularly, especially with regard to very liquid assets, such as bank accounts.
Imagine going to the store on a typical Sunday afternoon to buy groceries and learning that you have a freeze on your bank accounts. A levy “attaches” to the amount of funds in the bank on the date the financial institution received the Notice of Levy. Generally, financial institutions must hold any funds that have attached to the levy for 21 days from the date they receive the Form 668-A, Notice of Levy. During this time your account is under a freeze and payments you try to make will be declined and checks you have written will bounce causing additional fees to accumulate from your bank and making others aware that you are having money issues. If the levy is not removed prior to the 22nd day the funds may be surrendered to the IRS by your bank.
The somewhat good news is that a bank levy is a “one-time” action and generally, the IRS will wait approximately 30-days to receive a response from the financial institution before taking further action. However, the not so good news is that the IRS can issue multiple levies at one time. Not only that but they can issue them over and over again until they get every last penny they believe is owed to them.
We work with our clients to resolve your tax issues so you can agree with the IRS on a reasonable amount and repayment plan to keep this from happening to you.