An IRS levy, garnishment, or lien is a frightening prospect for anyone who owes back taxes. Our team is experienced in advising clients on available options and advocating on collection alternatives.
Likely, anyone reading this page is concerned about enforcement action. Most so-called tax resolution firms and tax lawyers will exploit this fear to try and extract large fees. This page is intended to educate you on the realities of the situation. Some will be able to obtain self help, while for others it might be wise to hire a professional. Please keep in mind that each collection case is unique based on the circumstances. The discussion below speaks generally to most collection cases.
First, the vast majority of IRS enforcement is civil, not criminal. IRS reserves criminal prosecution for the most egregious actors. While criminal liability should be evaluated, it is improbable for most taxpayers.
Rather the IRS and other tax agencies have two primary enforcement mechanisms. The first is a levy. A levy is when the IRS takes assets to pay a tax balance. This may come in the form of wage garnishment or a bank levy. In rare cases, IRS will take action to administratively or judicially seize property like valuable jewelry or real estate.
The second enforcement mechanism is a lien. A tax lien is the government’s legal claim against your property. It is typically recorded in the county you reside and attaches to title of any real estate you own. A lien will come into play if you attempt to sell or refinance the property.
Preventing liens and levies depends on the amount owed, whether IRS has begun these actions, and whether the taxpayer’s account is assigned to a revenue officer for collection. Generally most taxpayers can take action to prevent levies.
The IRS has two threshold requirements to avoid enforced collection. First a taxpayer must achieve filing compliance. This means all tax returns have been filed. Second, a taxpayer must have paid all estimated taxes for the current tax year. This sounds relatively simple but this can trip up many taxpayers. And IRS strictly enforces these requirements.
Taxpayers that do meet these requirements can pursue a collection alternative. There are three primary options: Offer in compromise, an installment agreement, and currently not collectible status. All three are based on a taxpayer’s ability to pay towards the balances. The IRS evaluates the taxpayer’s assets, income, and allowable living expenses to determine that amount.
As a starting point a taxpayer should complete an IRS Form 433. It is helpful for the taxpayer to review the applicable IRS national standards to better anticipate IRS analysis of expenses. And for any taxpayer interested in the Offer in Compromise they should first try the IRS pre-qualifier tool. This will help taxpayers assess their options.
Kugelman Law has substantial experience advising and advocating for taxpayers with IRS collection issues. Please contact us if you would like us to advocate on your behalf.
Did you know? For taxpayers that owe less than $50,000 can set up a streamlined installment agreement online without providing any financial information.