When a taxpayer owes money to the IRS, the IRS can collect the unpaid taxes, penalties, and interest in several ways. Among these collection methods are tax liens, levies, and IRS wage garnishments. This article will discuss each method, offering a broad description and explanation of each. The IRS is required to send you letters before taking any collection actions and these letters are sent in an augmenting pattern. This means that the IRS will begin by sending a letter stating that you owe unpaid taxes and gradually step up the collection procedure if you do not make arrangements to pay. Taxation attorneys and Enrolled Agents are specialists in IRS collection relief and tax resolution. If you have not dealt with the IRS in the past, hiring a local tax attorney or Enrolled Agent can help save your assets.

A Federal Tax Lien is filed against taxpayers who owe a minimum of $10,000, an increase from the $5,000 threshold prior to the changes announced in the IRS Fresh Start Initiative in 2012. IRS tax liens are often misunderstood to be filed against a taxpayer’s property. However, a tax lien is actually filed against a taxpayer as an individual, granting the IRS the ability to take possession of any of your assets. When the IRS issues a lien against a taxpayer, it simultaneously issues a Notice of Federal Tax Lien which can be found on your credit report, preventing you from taking out any new loans and signaling to all of your current debtors that the IRS tax debt takes priority over the debts you owe to them. IRS tax liens can be removed if a taxpayer enters into an arrangement to pay the IRS, however, it is the duty of the taxpayer or the tax professional representing the taxpayer to ask the IRS to remove the lien. Generally, if a taxpayer does not take any action towards repaying their tax debt after an IRS lien is filed, the IRS may send a Notice of Intent to Levy.

If you receive this notice letter from the IRS, it is crucial for the protection of your assets that you immediately contact an IRS tax attorney or Enrolled Agent to represent you before the IRS. As opposed to a lien, a Tax levy is when the IRS actually takes possession of some or all of your assets and sells them in order to collect your unpaid taxes. The IRS can levy your personal property, investments, and real estate. Personal property is traditionally defined as “moveable property” and includes items such as your car, boat, motorhome, and jewelry. Investments that the IRS can levy include your traditional or roth 401k or IRA accounts in addition to bonds or stocks that you own as well. Real estate property is property that cannot be moved such as your first and or second home, rental property, and land that you own. If you have received an intent to levy, it is not too late to halt the collection process. You can try removing the levy by entering into a monthly Installment Agreement or filing for Currently Non-Collectible status.  These processes can be very straightforward in some situations, but many others find this stage of the collection process to cause them the most stress.

 Before the IRS can take and sell your assets, they must issue you these three letters:

  • Notice and Demand of Payment

  • Notice of Intent to Levy

  • Notice of a Right to a Collection Due Process Hearing

The IRS may also place a levy on your work income, called wage garnishing. If the IRS begins to garnish your wages, they will directly contact your employer to begin the garnishing. Once IRS wage garnishing has begun, the IRS will usually only consider ceasing the garnishment of your wages if you can prove that it is causing you economic hardship. IRS wage garnishments are limited to 25% of your wages, or the amount by which your wages are greater than 30 times the Federal Minimum Wage ($7.25 x 30 = $217.50). In cases where a taxpayer owes child support and certain state and or federal taxes, up to 65% of your wages can be garnished. These rates are calculated using your disposable income. The IRS defines your disposable income from wages as your gross earnings less any legally required deductions. Legally required deductions include your federal, state, local, and social security taxes plus unemployment insurance and state employment retirement systems).

Contacting a professional to assist you throughout your tax resolution process can yield many benefits. Upon dealing with the IRS, it is critical to know their rules and abide by them. Knowledge of the Internal Revenue Code (IRC) and IRS procedures can remove months of waiting and accrued interest in your tax relief case.

Settling your tax debt can entail a long and complicated process. For more information on how the Hillhurst Tax Group located right off of Los Feliz and the 5 Freeway can help you with all of your IRS tax problems, email us at info@hillhursttaxgroup.com or call us to set up a free consultation with our Los Feliz IRS tax attorney or Enrolled Agents at (323) 486-3314.