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The Ultimate Beginner's Guide to Levies and Liens

The Ultimate Beginner's Guide to Levies and LiensWith our ultimate beginner's guide you can learn everything you've ever wanted to know about levies, liens, and how they could affect you.

Taxes are complicated and they often come with their own set of hard to understand words and phrases. The W Tax Group is here to help you figure out all of the complexities that come with understanding your taxes. That's what good a tax attorney does-we read the long, boring tax laws so you don't have to! In this blog post, we're going to discuss everything you need to know about levies and liens, and how they can affect you and your taxes. Read below for the ultimate beginner's guide to levies and liens.

What in the World are Levies and Liens?

Yes, it's true that levy does sound a lot like levee-the place where Don Mclean likes to drive his Chevy. Unfortunately, the kind of levies we're talking about involve neither river embankments nor the 1971 smash hit, "American Pie." The term levy has some pretty serious consequences for taxpayers and small businesses if the IRS decides to impose one on you.

The literal definition of a levy is the seizure of a taxpayer's property by the IRS in order to satisfy a tax debt. This basically means that if you cannot, will not, or do not pay your taxes the IRS will find a way to get the money it's owed. If this means seizing your personal property like your house, your car, or your business, the IRS is not above doing so.

A lien is a little different than a levy in that it's the legal claim by the IRS on a taxpayer's property for payment of a tax debt. The IRS can have a tax lien on all the property and rights to property that you own. This means all property, whether it's real or personal, tangible or intangible.

It should be noted that if the IRS does decide to impose a levy on your property, a Notice of Levy from the Automated Collection System (ACS) will be sent your way by a third party. The IRS will put a levy on anything that can be turned over by writing a check, including but not limited to your bank account, wages, commissions, retirement benefits, or money received as a contractor. The IRS isn't messing around when it comes to those who avoid paying their taxes.

When You Need to Worry About Levies and Liens

The short answer is if you have delinquent taxes that need to be paid. The long answer-we're not even going to go there. Just know that the IRS issues levies only when they haven't gotten taxes that are due. If you're exempt or have paid your taxes like you should, then you have nothing to worry about.

In general, the IRS only issues levies when the following things happen:

  • The IRS figured out you didn't pay your taxes and sent you a notice demanding payment.
  • You threw away the letter (or lost it in the junk pile), and haven't paid the taxes within 10 days of the notice.
  • The IRS sent you a Final Notice of Intent to Levy along with a helpful Notice of Your Right to a Hearing at least 30 days before the Levy
  • You completely ignore the Final Notice and neglect to file a Collection Due Process form in response.
  • If you do decide to give the IRS your time of day and file a Collection Due Process form, you go to your hearing and the verdict is to sustain the proposed levy. Ouch.

After all of this happens the IRS will then receive liens as a legal claim for security against the tax debt. Keep in mind that liens generally happen before levies. Once you've ignored the IRS's notice demanding payment and haven't paid your debt in 10 days, the liens on your property automatically go into effect.

This all sounds like pretty heavy stuff and one heck of a tax controversy. If you ever find yourself in this situation (which you shouldn't if you pay your taxes!) then you're going to need to hire a tax attorney ASAP. The W Tax Group is here to help figure out the best tax resolution for you.

Still have questions about your taxes? Check out our free special report, "5 Questions You Must Ask Any Tax Professional Before You Hire Them."

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