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The IRS has two primary ways to collect on tax debts: Tax Liens & Tax Levies.

IRS liens are filed to protect the government’s interest in property that taxpayers own. When the lien is filed, it attaches to all tangible property that is recorded through the taxpayer’s local county clerk and recorder’s office. By filing this lien, the IRS is stating that it has an interest in your property, much like a mortgage company does when it files its lien. Again, it is to protect the interest of the government and it secures rights of the property.

Federal tax liens only attach to property within the county that the IRS filed the lien in. Once filed, it encumbers all real estate within that particular county. Property address are not formally listed in the lien; however, it is a blanket lien, which will attach to anything associated with the individual(s) Social Security Number (SSN) or business Employer Identification Number (EIN). This lien does not give the IRS right to seize the property right away, but it does give them rights to any proceeds from the sale of the property. If the IRS files a lien against you or your business, there is a thirty-day time period to file a formal appeal for reconsideration of the lien filing. Once the lien is filed, credit reporting agencies will include this on your credit report as it becomes public record. The lien will also stay in place for a period of 10 years. For additional information on this collection time period, please refer to this article.

Note:   For appeal filings, you must use a Form 12153, Request for a Collection Due Process Hearing, or a Form 9423, Collection Appeal Request.

An IRS levy is a legal seizure of property to satisfy a federal tax debt. They are originated when the IRS determines that it is an appropriate action in order to collect on a federal tax balance owed. Once that is determined, levies can be issued against wages, bank accounts, accounts receivable, life insurance (with cash values), and retirement accounts. In extreme circumstances, IRS levies can be used to seize physical property such as business equipment, personal residences, and vehicles. However, before any of this can happen, the IRS must issue a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least thirty days before a levy is issued.

It is important to note that the IRS does not have to file a federal tax lien in order to issue a levy. As long as appeal rights are given at least thirty days before, then a levy can be issued.

Important notices regarding tax liens and levies:

CP504, Notice of Intent to Levy: This notice is issued after a balance due notice is given to the taxpayer. The IRS cannot take enforcement against a taxpayer with this; however, it is a warning prior to the final notice.

Letter 1058, Final Notice of Intent to Levy: This is the last warning before levy action is taken. There are 30-day appeal rights and action needs to be taken.

Letter 3174: Refresher notice issued by the IRS to inform taxpayers that they current owe a tax liability and Enforced Collection Action is imminent unless the account is satisfied. This notice follows a Letter 1058.

CP 297, Final Notice – Notice of Intent to Levy: The Internal Revenue Service will issue a levy against any federal payments due to the taxpayer.

LT11: See Letter 1058

LT16: See Letter 3174

CP90, Final Notice – Notice of Intent to Levy: The IRS will issue a levy against any federal payments due to the taxpayer including Social Security benefits.  Property (or rights to) is also subject to levy.

CP91, Final Notice before Levy on Social Security Benefits: The IRS may levy 15% of the taxpayer’s social security benefits on a continuous basis.

Form 668-A, Notice of Levy: Most widely used for levies on bank accounts and accounts receivable.

Form 668-W, Notice of Levy on Wages, Salary, and Other Income: Issued against a taxpayer’s wages.

Form 668-Y, Notice of Federal Tax Lien: Informs taxpayer of lien filed against assets owned.

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