Are you worried about missing tax payments to the IRS?
If you start missing payments, the IRS has several legal ways to collect tax debt, which can be frightening to face.
Two of the tools available to the IRS are a tax lien and a tax levy. In this article, you’ll learn the differences between them. More importantly, you’ll learn to avoid losing your property and assets to the IRS.
What Is a Tax Lien?
A tax lien is when the IRS makes a legal claim against the property you own to secure payment of the tax debt you owe. It can include property you obtain after the IRS issues the lien.
A federal lien will not take your property. First, the IRS will notify you that you owe taxes and demand payment. The letter tells you the lien will go into effect within ten days.
The IRS may also issue a Notice of Federal Tax Lien. This document is a public record, and it notifies creditors that there is a federal tax lien on your assets.
The best way to avoid a lien is to settle the tax bill you owe. If you cannot afford your tax bill, you want to contact the IRS before receiving a lien. The IRS offers taxpayers payment programs to help you pay off your account.
What Is a Tax Levy?
A tax levy is the collection process. This is when the IRS seizes your property or other assets to pay the taxes you owe. There are several different types of tax levies. They include:
The IRS will convert your assets into cash. That money will help pay down the tax debt you own.
However, if you have a current or pending payment plan agreement, the IRS cannot issue a levy.
Additionally, if you cannot pay your tax bill because of economic hardship, they cannot issue a levy.
How Does a Tax Lexy Work?
If you leave your tax debt unpaid for an extended period and don’t indicate you have a plan to repay the debt, the IRS will issue a levy. You will receive four warnings or collection notices. They are:
- Notice CP14 (Balance Due)
- Notice CP-501 (Important)
- Notice CP-503 (Urgent)
- Notice CP-504 (Refund Levy)
The Final Notice of Intent to Levy (Letter 1058 or LT11) is the last notice you’ll receive from the IRS. The letter informs you of your right to appeal the levy and gives you 30 days.
If you don’t appeal the levy or pay your tax bill (including internet and penalities), the IRS will begin to levy your assets.
Get Help to Avoid a Tax Levy
If you receive a tax levy from the IRS, they will seize your property and assets because you failed to pay your tax bill. Fortunately, there are many steps you can take to avoid this from happening.