What is the Difference Between an IRS Tax Levy, and an IRS Tax Lien? | Los Angeles IRS Attorney Dennis Brager

tax liens and tax levies are staples of the Internal Revenue Service ‘s tax debt collection enforcement machinery. They are two of the very common methods the IRS uses to get the money it ‘s owed if a taxpayer does n’t write a see voluntarily, or for that matter, cursorily adequate . Tax Liens A tax spleen first arises when a person who owes tax fails to pay the tax after an official “ demand ” by the Internal Revenue Service. The lien is sometimes referred to as a “ mystery spleen ” because evening though at first gear there is no public record, it attaches to all of the taxpayers ‘ property and rights to property – both very estate and personal place – as of the date the tax is assessed. The consequences of this is that if taxes are assessed against you on July 1st and you give the property a third party as a gift on July 2nd, the tax spleen continues to attach to that property even though you had no cognition of the universe of the tax spleen and even though the person who received the property did n’t know that the tax lien had arisen. This occurs frequently in divorces when one spouse who owes taxes to the IRS transfers ownership of property to the other spouse as part of a marital dissolution. evening though neither spouse is aware of the tax lien, it continues to attach to the property in the hands of the spouse who did n’t have any tax liability, and the IRS can collect the taxes owed by seizing and selling the place. Certain third gear parties are protected from the impact of the secret tax lien. These are by and large people who gave “ average value ” for the property received. For model, if your home was subject to a hidden IRS tax spleen and you sold it to a one-third party for its fair grocery store value, the IRS could not go after your home once it had been transferred to person else. To be clear, this rule would not be of any assistant if the person who received the dwelling paid less than its actual value. When most taxpayers or tax attorneys refer to a tax spleen, they are actually referring to a “ Notice of Federal Tax Lien ” ( NTFL ). A Notice of Federal Tax Lien is a document filed in a public place such as a County Recorder ‘s Office or with the Secretary of State. It is a notice to the global that you owe taxes. A Notice of Federal Tax Lien generally lists the total of the taxes owed, the type of tax, and even the years for which taxes are owed. It besides lists the date the tax was assessed. It is worth noting that the Notice of Federal Tax Lien is a inactive document. therefore, if you make payments on your tax liability, the Notice of Federal Tax Lien will continue to list the lapp total due. alike, as sake and penalties accrue it will not be updated to reflect the extra amounts due. That is why the amount listed in the NFTL is not a true contemplation of your tax liabilities.

The Notice of Federal Tax Lien will be picked up by the diverse credit report agencies and will cause meaning citation problems. If you own real property and try to sell it, the IRS will be paid the equity in your property. The tax spleen does not, however, take any money out of your bank history . Tax Levies A tax levy is not available for the general public to see and does not by itself affect your citation rat or prevent you from selling your property. however, if the IRS serves a tax levy on your bank, then it is required to send all of your money to the IRS. The bank can not immediately send your funds to the IRS, however. rather, Internal Revenue Code section 6332 ( c ), provides that the bank must hold onto the funds for 21 calendar days. You can expect that the bank will notify you of its receipt of the tax levy. however, this may take a few days until after the deposit receives it and that 21-day clock continues to tick. The 21 day period is extremely crucial because it gives you an opportunity to negotiate with the Internal Revenue Service to release the tax recruit before the bank sends the funds. While it can be difficult to get the IRS to agree to release the tax recruit, an experience tax litigation lawyer can sometimes get this achieve, but it will depend on your overall site including such factors as :

  • How much money is in the bank
  • The value of your other assets
  • The amount of your income and expenses
  • The total amount of your tax bill
  • Whether you have been cooperating with the IRS by responding to their inquiries

Do n’t expect to get rapid notification from the IRS that they have sent a tax levy. The inner operate procedures of the IRS known as the Internal Revenue Manual specifically instruct its employees to delay sending a copy of the tax recruit to the taxpayer. See IRM 5.11.2.2.7.

A tax levy sent to the bank is a “ one shoot ” tax levy. It only attaches to the funds in your report at the moment tax recruit is received. A tax recruit on wages, commissions, or early exchangeable payments is a continuing levy. That means that unless the IRS agrees to release the levy, your employer will continue to send the bulk of your paycheck to the IRS until your entire tax liability has been satisfied. If the IRS sends a tax levy to your employer, it is required to send your paycheck to the IRS minus a very small amount which is exempt. There is no 21-day holding period. The tax recruit is effective with your identical first paycheck after the employer receives the tax recruit. Since there is no holding time period, if you find out the IRS has served a tax levy on your employer, it is extremely important to engage tax advocate to begin contiguous negotiations with your employer BEFORE your following paycheck. Remember, once your funds have been forwarded to the IRS either by the bank or your employer, you are not getting them bet on. If you would like to see how little of your paycheck is exempt from an IRS tax levy, take a count at IRS Publication 1494. For example, if you are one and have no dependents, then the IRS will let you keep $ 866.67 per calendar month !

Related Posts