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By filing a Notice of Federal Tax Lien, the IRS is publicly telling the taxpayer's creditors that it has a claim on some or all of the taxpayer's property (such as a house or automobile) and also on all of the taxpayer's rights to property (such as a business's Accounts Receivable.) This includes property acquired after the IRS Tax Lien has been filed. Although technically the assets still belong to and can be used by the taxpayer, the IRS Tax Lien prohibits any sale of those assets by the owner because of the secured interest that the Lien grants to the IRS. You can think of an IRS Tax Lien as a tool for 'staking out' the assets of a tax debtor. Even if the taxpayer does not have any significant assets, the IRS tax lien will still show up on the taxpayer's credit report. A Federal Tax Lien can make getting a loan; a new credit card or signing a lease nearly impossible because of the damage it does to one's credit rating.
The IRS will not permanently remove a Tax Lien until the taxpayer's debt is completely paid in full or settled out for less that the amount owed. However, the IRS is often willing to Subordinate their lien to another lender if by doing so will assist the taxpayer in paying back their overdue taxes. For instance, if a tax debtor who owned a house wanted to apply for a home equity loan or refinance, then the IRS would consider granting a Lien Subordination to give the new lender's lien first postion on the property so long as some or all the proceeds of the loan would be paid to the IRS. Likewise, if the owner was going to give up the property entirely, then he or she could apply for a discharge of the Tax Lien as long as the IRS would receive any proceeds net of closing costs.
We specialize in assisting clients who are dealing with an IRS or State Tax Lien. If you do not have the funds to repay the debt in one lump sum, you may be able to submit an Offer in Compromise to settle the tax debt for a reduced amount, or set up a Payment Plan to pay off the debt over time.
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An IRS Tax Levy is a legal seizure of assets taken in order to satisfy a tax debt. An IRS Tax Levy can be attached to any property, including real estate and automobiles, but is most frequently applied to bank accounts, securities, wages and even a business' accounts receivable. When the IRS issues a Tax Levy, it bars access to the affected assets by the rightful owner and transfers that authority to the IRS, pending outright seizure.
When the IRS assesses a liability against a taxpayer, it first sends that taxpayer a Notice and Demand for Payment. If the taxpayer does not respond, The IRS will likely file a Tax Lien and then Issue a Notice of Intent to Levy to the taxpayer. (This letter will say "We Intend to Levy Certain Assets" at the top). If the taxpayer does not pay the tax debt in full or make other repayment arrangements soon, the IRS Tax Levy then goes into effect. Depending on what assets were levied, the IRS can then empty out the taxpayers bank account or contact businesses that owe the taxpayer money and order them to send the money owed to the IRS. IRS tax levies are a particularly aggressive form of IRS Collection action and can create considerable hardship for any taxpayer who is the recipient of a Tax Levy.
Releasing an IRS Tax Levy generally requires coming to some kind of repayment agreement with the IRS. For instance, if a taxpayer decides to submit an Offer in Compromise proposal, then IRS Collections will be put on hold and the IRS will release the Tax Levy while the terms of the settlement are worked out. It is also possible to have an IRS Tax Levy released based on a Hardship, if the taxpayer can prove that the IRS Tax Levy is inhibiting their ability to meet the basic necessities of living. Releasing a Levy will provide some breathing room while a more permanent Solution is figured out. Due to the severity and complexities which are caused when a levy is issued, we usually recommend Professional Representation when a taxpayer has been levied.
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