Federal Tax Liens Under sections 6321 and 6322 of the Internal Revenue Code, the Internal Revenue Service can file a tax lien in favor of the United States government if a taxpayer does not satisfy a tax debt after demand has been made for payment. The lien attaches to all property and rights to property of the taxpayer. The federal tax lien arises automatically if the taxpayer does not satisfy a tax debt within 10 days from the demand notice and this lien relates back to the date of assessment. However, the Internal Revenue Service is not protected against other creditors of the taxpayer until the actual Notice of Federal Tax Lien is filed. If the IRS has filed a tax lien against you, we recommend you speak with a tax attorney immediately.
In general the IRS will file the notice of federal tax lien in the county where the taxpayer resides or any county where the taxpayer is known to own real property. The federal tax lien becomes public record and can have a negative effect on credit. If the taxpayer were to sell real property after the federal tax lien has been filed, it is possible that some, all or none of the proceeds from the sale would be paid to the IRS because of the tax lien.
The Internal Revenue Service will release a federal tax lien within 30 days of the tax debt being satisfied. Further, the IRS may withdraw a federal tax lien if this withdrawal will facilitate collection of the tax or is in the best interests of the government.
IRS Levies & Wage Garnishments
If a taxpayer has an outstanding tax debt to the IRS and a formal agreement has not been established, the IRS will eventually issue a Final Notice of Intent to Levy (Letter 1058) and move forward with collection action such as bank levies and wage garnishments.
A bank levy is when the IRS forwards a levy notice to the taxpayer’s bank. The bank is required to hold the funds in the account on the day the levy notice is received up and to the amount of the bank levy for 21 days and then release the funds to the IRS unless the levy has been released. It is possible that the IRS will fully release the bank levy or partially release the bank levy depending upon the circumstances.
A wage garnishment is when the IRS forwards notice to the taxpayer’s employee that certain portions of the taxpayer’s wages are to be paid to the IRS in satisfaction of the current tax debt. A portion of wages is excluded from garnishment based upon the taxpayer’s number of dependents, but the remaining amount must be paid to the IRS or the employer may be liable. Like a bank levy, a wage garnishment may be released or partially released by the IRS depending upon the circumstances.
Certain actions will prevent the IRS from issuing bank levies and wage garnishments. These include the taxpayer proposing an installment agreement or offer in compromise, formalizing an installment agreement or offer in compromise, filing for a Collection Due Process Hearing or filing bankruptcy. The proposals must be in good faith and not frivolous. If you are experiencing IRS collection problems, please contact a Denver tax attorney at The McGuire Law Firm to discuss your issues and take advantage of our free consultation.