FAQs: IRS & Tax Liens & Levies

What would the IRS do if I ignore the Notice of Federal Tax Lien?

      If the IRS does not hear back from you after a reasonable length of time, it would take more drastic actions in order to collect the tax. The next step is usually imposition of tax levy. Section 6331 of the Tax Code defines a tax levy as the power to collect taxes by seizure of the taxpayer's assets. Note the difference between a tax lien and a tax levy: while a filed tax lien announces to the world that your properties are subject to a tax lien, a tax levy actually removes the property from your possession. One of the IRS's favorite methods of tax levy is bank levy. It is a favorite method because it does not involve the sale of property and instead directly removes the funds from your bank account and deposits it with the U.S. Treasury. If you do not happen to have very strong arguments to show the inappropriateness of such action, recovering such funds is virtually impossible.

      The IRS may also garnish your wages or salary. Wage garnishment involves informing your employer of your tax delinquency. The IRS then serves notice on the employer that under the law it is obligated to direct a certain portion of your paycheck to the government. A wage levy permits a continuous attachment of the wages or salary due to a taxpayer. If no payment arrangements are made with the IRS, the wage levy continues until all tax debts are satisfied. This can last for years, especially since during the wage levy period, interest and penalties continue to accrue on the principal amount of the tax.

      Only certain types of property are exempt from tax levy. These include taxpayer's wearing apparel, schoolbooks, unemployment benefits, undelivered mail, certain pension benefits, payments needed for child support and service-connected disability payments. Most pension distributions are subject to tax levy. For example, if you have a 401(k) account but you are not entitled to distributions from the account because you have not reached the retirement age, the IRS can levy on your present right to such 401(k) distributions in the future. Thus, when you finally reach the retirement age, your pension money will be distributed to the government instead of being paid to you. Social Security retirement checks are regularly subjected to tax levy by the IRS. Your income from state retirement funds is also subject to federal tax levy.

      Tax Code Section 6343 sets forth the conditions under which the IRS should lift a tax levy. These conditions include the following:

•  The tax  liability underlying  the levy has been  paid or the statue of limitations  on collection
•  has expired;
  
  
•  Collection of tax would be facilitated by lifting of the tax levy;
  
  
•  The taxpayer has entered into an installment agreement with the IRS in order to satisfy the
•  tax debt;
  
  
•  The IRS has concluded that the tax levy has created economic hardship for the taxpayer.
  
  

      If you have received a Notice of Lien or Levy, you may request a Collection Due Process Hearing within 30 days. The hearing is conducted by an IRS Appeals Officer. During the hearing you may present evidence as to why you do not owe the tax, or how the IRS violated your due process rights by giving you defective notices.

      If you suspect that the IRS or the taxing authorities in Maryland, Virginia or Washington, D.C. are about to file a tax lien against you, or institute a tax levy, you should seek the advice of a tax counsel. The timely intervention of a competent tax attorney can help prevent a tax lien filing. If a tax lien has already been filed, a tax lawyer can assist you in releasing or lifting the tax lien. In addition, a tax attorney can help you release a tax levy against your bank account or your wages and salary. Finally, an IRS tax attorney can represent you during a Collection Due Process Hearing and help you achieve the best results.

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