The IRS has different ways of collecting unpaid taxes. After collection notices prove ineffective, more drastic collection enforcement – ranging from imposition of federal tax lien on personal and real properties, levying of bank accounts to garnishing of wages, social security benefits and pensions – is undertaken.
A bank levy is sent to a bank by the IRS to freeze your account, meaning that you cannot withdraw your money. The freezing of the funds is good for 21 days from the time the bank receives the order of levy from the IRS and after that period, the funds are sent to the IRS. Within that 21-day period, however, a taxpayer can request the IRS to release the frozen funds if it can be shown that the frozen funds will be used to pay rent, mortgage, utilities, medical expenses, etc. The IRS can either release the entire amount or only partially, depending on the justification provided by the taxpayer. But more often than not, the IRS does not release levied funds.
The seizure or taking of the taxpayer’s wages is what is commonly known as garnishment. The IRS does this by directing the taxpayer’s employer to withhold and remit to the IRS a portion of the taxpayer’s wages. Garnishment also applies to Social Security benefits or income from retirement accounts or pensions.
Another tax collection tool of the IRS is the imposition of a federal tax lien on the taxpayer’s property. A federal tax lien is a notice of claim by the government on all property and rights to property of the taxpayer. What a lien basically does is that the tax debt follows the property to make sure that the IRS gets paid if the property is sold. For example, if Mr. Cruz, a taxpayer, owns a residential property but owes the IRS $50,000 in taxes, the lien will be recorded on the title to the property. If Mr. Cruz sells the property at a later time, the IRS will assert its lien and will try to collect the $50,000 from the proceeds of the sale.
A federal tax lien can become burdensome on a taxpayer because it will be difficult to sell or borrow against the property subject to it. It will also affect the taxpayer’s credit rating as it will be reflected on credit reports and lenders will be notified of the IRS’s claim on the property.
If you are in any of the situations mentioned above due to IRS tax liabilities, you should contact a tax professional right away to prevent your money in the bank, wages, social security benefits and properties being taken from you. Tax professionals are equipped in dealing with these matters. In my case, I have successfully helped a number of taxpayers prevent levies, wage garnishments or remove liens, and come up with a resolution acceptable to both the taxpayer and IRS.
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Edgardo M. Lopez is an attorney licensed to practice in the Internal Revenue Service and the United States Tax Court. He has been an attorney for 25 years and he is a member of the American Society of Tax Problem Solvers. His IRS practice is throughout the United States and he has offices in the entire State of California (Los Angeles, San Francisco, and San Diego). His office has an A+ rating with the Better Business Bureau.
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