IRS Liens, Levies, Seizures, and Garnishments

If you were determined to owe taxes and you failed to pay or negotiate a payment plan to settle your tax account, the IRS is empowered to file for and place federal tax liens on your public record indicating that you owe the government various taxes. It is usually filed with the County Clerk at your place of work, business, or residence.  The lien is the initial step the IRS will use to take control of your assets, and it is usually followed by an IRS action for seizure, levy, and wage garnishment.

Wage garnishment is very commonly used by the IRS to recover taxes owed by employed taxpayers. Upon filing for wage garnishment with an employer, the employer is required to deduct from the employee's paycheck and directly pay to the IRS the amount specified in the garnishment document. Wage garnishment remains valid until the amount owed to the IRS is fully paid or until such garnishment is released. Garnishment can be avoided by negotiating a payment plan with the IRS.

When the IRS levies your bank account that means the actual taking of money from your account. You have no say whatsoever in this action as the bank must comply with the IRS demand to obtain any funds in your bank accounts. A revenue agent who is empowered to cash-in all balances in your savings and checking accounts can do this action in record-time. In the same manner, a levy can be placed on your accounts receivable, earnings, and wages. The IRS will exercise their power to seize your assets as the last resort. Seizure will relinquish your ownership rights and allow the government to dispose the seized assets in order to recover the money you owe in back taxes.

Requirement

The IRS would usually make several attempts to collect an amount owed to the government prior to resorting to actions such as Levy, Liens, and Seizures of taxpayer assets.  Under Section 3421 - Approval Process for Notices of Levy, Liens, and Seizures, prior to taking action a supervisor is required to review the taxpayer's information to:

• Verify that a balance is due,
• Verify the taxpayer's equity in the property when seizure is proposed; and
• Affirm that a lien, notice of levy or seizure is appropriate under the circumstances.
• Approve a determination to file a Notice of Federal Tax Lien by an employee below Grade 9.

The determination of whether a notice of Levy, Liens, and Seizures is required and/or appropriate, among other factors, would highly depend on:

• How the taxpayer has responded and handled the IRS communications concerning the matter on hand (responsiveness and attitude)

• The nature and amount of the tax liability owed (materiality)

• Taxpayer’s financials (net-worth in historical and projections considerations, “what is at stake for the taxpayer?”)

Procedures

The IRS will have to follow the procedures below for the review and approval process:

When a notice of levy, lien, or seizure is turned in for approval, the agent MUST include the following information in the history:

• A summary of any information the taxpayer has provided that may affect the decision to levy, e.g. claims that the assessment is wrong;
• If the taxpayer has submitted such information, an explanation that the employee has reviewed the information, the employee's findings and why the action should still be taken;
• Verification that the amount is owed, e.g. the balance due has been confirmed on IDRS;
• An explanation as to why requested action is appropriate considering the amount owed and any circumstances that are known about the taxpayer and the liability.

Some things that might influence how appropriate the requested action is may include, but are not limited to:

• The taxpayer's responsiveness to attempts at contact and collection,
• Anything that is known about the taxpayer's financial condition - including equity information,
• The taxpayer's history of delinquency, * the taxpayer's efforts to pay the tax, and
• Whether current taxes are being paid.

This information must be clearly marked in the history. The format is at local management discretion.

In general, Levy, Liens, and Seizures procedures are avoidable; however, the IRS tends to use such procedures to protect an asset (revenue) believed to be owed to the government, and to combat an unresponsive taxpayer.

The service we provide:

If you are faced with liens, levies or seizures, we may be able to help you by negotiating the matter on your behalf with the IRS. Among a wide-range of options, our service may include:

• Providing you with representation and professional consultation about this matter by an expert in this field so you do not have to personally deal or communicate with the IRS.  

• Perform a complete review of the tax liability file to determine the correctness of the amount of debt claimed by the government. 

• Filing an amended return if deemed required and is likely to reduce the tax liability causing the action. Examine your ability to pay the debt in view of your exemptions under I.R.C. § 6334(d)(2), and determine whether such debt can be re-classified as “Uncollectible”

• Determine whether a levy on your “wages” may cause you a hardship. The new I.R.C. § 6343(e) provides that the Service must release a wage levy, as soon as practicable, upon agreement with the taxpayer that the tax is not collectible. Examples would include situations where the wage levy is creating an economic hardship on the taxpayer and situations where the levy does not yield any net proceeds to the Service following the calculation of the taxpayer's exempt amount under I.R.C. § 6334(d)(2). 

• Request an abatement of interests and penalties if applicable under Section 3305 (Suspension of Interest & Penalties Where Secretary Fails to Contact Individual Taxpayer). The provision amends “?6404” of the Code to provide that in the case of an individual who files an income tax return on or before the due date for the return (including extensions), if the IRS does not provide a notice to the taxpayer specifically stating the taxpayer's liability and the basis for the liability before the suspension period begins, the IRS must suspend the imposition of any interest, penalty, addition to tax, or additional amount with respect to any failure relating to the return which is computed by and which is properly allocable to the suspension period. The suspension period begins 18 months (12 months for taxable years beginning after December 31, 2003) after the later of (1) the date on which the return is timely filed, or (2) the due date of the return without regard to extensions. The suspension period ends 21 days after the date on which the required notice is issued by the IRS. The provision does not apply to:

  • any penalty imposed by section 6651,   

  • any interest, penalty, addition to tax, or additional amount in a case involving fraud,

  • any interest, penalty, addition to tax, or additional amount with respect to any tax liability shown on to the return, or   

  • any criminal penalty.  

• Determine whether the penalties can be reduced under Section 3303 (Mitigation of Penalty on Individual's Failure to Pay for Months During Period of Installment Agreement) (I.R.C. ? 6651(h))   

• Arrange and negotiate a payments plan with the IRS and request a release of the levy under I.R.C. § 6343(e) or if an arrangement for a payment plan was made.  

• Advising you whether an “Offer in compromise” is an option that can be used to remove the debt.

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Last modified: May 09, 2009