The Difference Between An IRS Levy And An IRS Lien
When one thinks about how the IRS tries to collect back taxes, 2 usual methods come to mind. An IRS levy and an IRS tax lein. Many have confused these as being the same, but, in fact, they aren't.
An IRS levy is a seizure of personal assets to pay a tax debt. However, a tax lien protects and secures the government's interest in a property as well as any legal rights to property. A tax lien will not actually take the property. Usually, it will go into effect when the property is sold. At the time of sale, the IRS has rights to the proceeds of the sale. However an IRS tax levy actually seizes personal property.
Prior to the IRS levying, normallythree specifications need to be met:
1. The tax has been assessed by the IRS and a Notice of Demand for Payment has been sent.
2. The tax payer has avoided or simply declined to pay the tax debt.
3. The IRS sent a "Final Notice of Intent to Levy and Notice of Your Right Hearing" no less than 30 days before the tax levy. The IRS may place it at a home, a place of business or mail it to the last known address that the IRS has on file.
There are 4 typical types of levy sources for the IRS:
1. Bank Accounts: When the IRS takes money directly from your bank accounts. An individual generally will not realize it until it has already happened. The bank must freeze funds up to the amount due on the same day the levy is received. After 21 days if the levy has not been removed, the bank has to send the funds to the IRS.
2. Wage Levy: Is sent to the employer and mandates the they withhold a specified percentage of the taxpayer's paycheck. The IRS can levy up to 85% of your pay check. The IRS may also levy Social Security Payment
3. 3rd party accounts: This levy would include retirement accounts, stock accounts, 1099 sources and basically any source of income or assets with a few exceptions.
4. Assets: Because this is typically difficult for the IRS to do, it is the least common type of IRS levy. This would include automobiles, homes, boats or any other type of asset.
There is also a difference between a continual levy and a one-time levy. A continuous levy could be placed on social security, wages and other sources of income. A one-time levy would include a bank levy and 1099 income. The IRS may only acquire the amount in the account or the total amount due the independent contractor the day the IRS levy was issued. This will not prevent the IRS from levying again.
Tactics to stop irs levy procedures:
An IRS levy will continue until the tax bill is paid, the statute of limitations expires, or other arrangements are made, which could include an Installment Agreement, having the account placed in Section 53 or a hardship, or getting an Offer in Compromise accepted.
Additionally, hiring a tax expert with practical experience in working with the collection department of the IRS will make sure that the tax laws and regulations are worked to the tax payer’s advantage. An experienced tax professional will also know how to deal with tax debts and the fastest method to stop irs levy activity based on the tax payer's particular circumstances.
