IRS Tax Problems

Have You Received a Tax Lien Notification from the IRS?

Have You Received a Tax Lien Notification from the IRS?

Repaying your debts to banks and other creditors should be routine, but when you are unable to meet your financial responsibilities, your debts to financial institutions are the least of your troubles; owing money to the Internal Revenue Service (IRS) is the real problem.

IRS Use of Tax Levies

The IRS has a number of ways to collect taxes that taxpayers do not submit. One is through a notice of levy, which provides the agency with the legal wherewithal to take whatever assets or monies are needed to meet a tax obligation. Through the notice of levy, the IRS is able to take the contents of bank accounts and circumvent the payment of wages or the dispersal of Social Security benefits. Even retirement income and physical assets such as real estate, automobiles and luxury items (e.g., boats) are available when a taxpayer fails to voluntarily pay a tax debt

The IRS can take not just existing assets but also monies that are owed to the taxpayer in the future – such as federal or state tax refunds – to satisfy a debt.

IRS Notification of Lien Is Required

When the IRS is preparing to act on a tax lien, it is required to provide written notification of the impending action. This notice must be provided no more than five days after the lien has been filed, and it must be delivered via certified or registered mail to the taxpayer’s last known address or in person at his or her place of business or home. Once this notice is provided, the IRS is required to meet three legal obligations before it is authorized to lay legal claim to the taxpayer’s property as security. It needs to show that a tax liability exists, provide appropriate notification of the amount owed along with a request for payment, and wait at least ten days following this notification. Once these requirements are met, if no payment has been received, the IRS is legally able to create and file a lien that allows it to take the individual’s car, home, and other property.

The filing of a lien provides official notification to any of the debtor’s other creditors and makes them aware that the government has a claim on any available funds until such time as the debt is completely satisfied. Though the government’s claim is often prioritized ahead of other creditors’, this is not always the case. Through the process of subordination, federal claims are made secondary to those of other creditors.

Tax Lien Withdrawals

In a few circumstances, a tax lien can be revoked:

  • When the IRS fails to file the notice according to its procedures or does not allowenough time to pass
  • When an agreement is filed allowing the taxpayer to pay the debt via installments (unless the agreement explicitly does not revoke the lien)
  • When revoking the lien expedites the payment of the tax debt
  • Whenan IRS taxpayer advocate determines that revoking the lien would be in the best interest of the government, the taxpayer, or both

What You Need to Know

If you receive an IRS lien, you need to take it very seriously. It will almost certainly have a significant impact on your credit rating, which is part of why the U.S. General Accounting Office has indicated that all satisfied liens should be released as quickly as possible.

With a federal tax lien in place, a business may not be able to get the credit that it needs to operate, and an individual may be unable to make critical purchases such as a car or house.

If you’ve been unable to pay your tax debt and are afraid that a lien or levy is pending, you need expert advice from an experienced tax professional. Contact one at your earliest convenience for advice on how to best handle this pressing issue.

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Spencer Wilson

Spencer Wilson

Spencer Wilson, EA is a tax preparer based in Long Beach, CA. Spencer Wilson Financial Management Services has been serving the Greater Los Angeles Area and Orange County since 2004. <br /> We began in the heart of Naples in Long Beach and we continue to work hard offering tax preparation and planning, business accounting and bookkeeping and payroll services . <br /> We have helped many different people and businesses succeed financially and take control over their finances.

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