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What you should know about IRS liens and levies

Some people only have to hear the words “IRS lien” or “IRS levy,” and they break out in a cold sweat. This may be because they are not quite current on their income tax obligations.

The Internal Revenue Service does have methods of dealing with recalcitrant taxpayers. However, the agency also gives fair warning of impending action and offers ways to halt a lien or levy process.

Understanding the difference

As a taxpayer, you should understand what these terms mean in case they turn up in your life:

  • A lien is a claim the IRS can place on your property until you have paid your tax debt. If you sell the property, the agency will receive payment first. Other debtors’ claims follow, and whatever is left after all debts have been satisfied is yours to keep.
  • A levy is the action that occurs when the Internal Revenue Service seizes the property on which they have placed a lien. Before that happens, a warning to you will be issued. It is called a “Final Notice of Intent to Levy.”
  • The property involved could be your bank account, your wages, your car or even your accounts receivable, if you are in business.

Filing an appeal

Although it is not a common event, the IRS does err at times in issuing levies. If you feel the agency has made a mistake in issuing one to you, you can call the phone number you find listed on the levy to discuss the matter. Since this is not an official appeal, however, you can also file an appeal for a hearing. In fact, it is your constitutional right to do so.

Seeking help

Both the lien and the levy are serious actions for the IRS to take, and you should respond immediately to either. You would do well to engage the services of an attorney who is experienced in dealing with tax matters and with the IRS in particular. It is important for you to act quickly, and you will be in a better position to do so when you have legal assistance.

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