The threat of an audit is a powerful deterrent and does a good job of motivating taxpayers to pay the IRS what they owe. But sometimes this isn’t enough and taxpayers still forego their legal duty to pay their tax obligation. When this happens, the IRS will reach out to the taxpayer to collect an outstanding tax debt. But when asking nicely doesn’t work, the IRS can impose a tax lien and/or a levy.
What’s the Difference Between a Tax Lien and a Levy?
A tax lien is a legal claim (also called a security interest) against someone’s private property. With an IRS tax lien, the IRS is taking steps to prevent a taxpayer from selling property that might otherwise be used to pay off a tax debt. A tax lien not only attaches to all of a taxpayer’s current property but future property as well.
A tax levy is more severe than a lien because it allows the IRS to not just place a claim on property, but physically take it. The IRS may do this in several ways, including the seizure and sale of assets and garnishment of wages. Surprisingly, as long as the IRS follows certain steps to get a levy, it doesn’t need to go court and have a judge grant permission to do so.
How Can I Remove an IRS Tax Lien?
The most straightforward thing to do is to pay off the tax debt. This is the simplest method, but usually not the easiest. After all, if the tax debt was so easy to pay off, the taxpayer would have paid it.
A second method involves getting a Certificate of Discharge. Under certain conditions, the IRS may agree to remove the lien through a Certificate of Discharge because it has made other arrangements with the taxpayer (such as a partial tax payment) or the IRS’ interest in the property is worthless. This might occur if another creditor has a higher priority security interest and that security interest exceeds the value of the property.
How Can I Remove an IRS Tax Levy?
Like the tax lien, the most straightforward (although not the easiest) method for removing a levy is to satisfy the tax debt. Alternatively, the taxpayer can remove a lien by showing:
- The levy has created an extreme financial hardship on the taxpayer,
- The property that has a levy is worth more than the tax debt and the taxpayer can prove to the IRS that the taxpayer will still be able to pay its tax debt if the levy is removed, or
- The levy has made it harder for the taxpayer to satisfy its tax debt.
Finally, the taxpayer can negotiate the removal of the levy in an Installment Agreement with the IRS. An Installment Agreement is basically a monthly payment plan with negotiable terms.
The above information assumes that the taxpayer actually owes a tax debt. Therefore, another way to attack the lien or levy is to argue that the taxpayer doesn’t owe the IRS any money. This isn’t easily done and the IRS usually doesn’t place a levy or lien on a property unless it’s pretty sure its owed money. However, this isn’t always the case and anytime at taxpayer is faced with an IRS lien or levy, they are strongly encouraged to consult with a tax professional to get a full understanding of their legal options.
Don’t let your tax situation get worse. Contact us with the details of your dispute and let us negotiate on your behalf. We guarantee to provide the best and most responsive service possible with highly advanced knowledge of what needs to happen so you can move forward.