Tax Liens, Levies and COVID?

kienitz leins levies and covid

The economic impact of the coronavirus cannot be understated. Realizing the financial toll it was taking on Americans, the IRS implemented the People First Initiative in March 2020. 

This was a set of temporary policies that reflected the IRS’ willingness to help taxpayers by providing additional leniency in its enforcement actions. For example, liens and levies imposed by IRS field officers or through automatic systems were temporarily suspended.

These collection activities by the IRS have resumed, including placing tax liens and levies on taxpayer property. But that doesn’t mean the IRS tax lien and levy process will be exactly the same now that we live in a world with the coronavirus. But before we explain how, let’s quickly go over tax liens and levies.

IRS Tax Liens

An IRS tax lien is a legal claim that the IRS has on a taxpayer’s current and future property. The purpose of the lien is to protect the IRS’ ability to collect its tax debt. This lien will automatically arise when the IRS sends the taxpayer a notice of a tax debt and the taxpayer fails to pay that amount in full.

However, it’s when the IRS files a Notice of Federal Tax Lien that the real trouble can start for the taxpayer. This serves as a public notice to the world that the taxpayer has a tax debt with the IRS and the IRS is asserting a legal claim to the taxpayer’s property. 

IRS Tax Levies

Tax levies are more serious than liens because the IRS doesn’t just claim a security interest in property, it actually takes it. This might involve garnishing wages or seizing physical assets.

It’s the tax levy collection process that has been most affected by the coronavirus. Specifically, in how a taxpayer can remove the tax levy.

Using the Coronavirus to Release an IRS Tax Levy

There are several ways a taxpayer can remove a tax levy. The simplest way is to pay off the tax debt, although that’s not a realistic option for most taxpayers.

Another way is to show the IRS how the levy is imposing a severe economic hardship on the taxpayer. This might include the taxpayer struggling to meet basic living expenses, like paying for food and housing. 

Given what the coronavirus has done to the economy in the United States, especially in the sheer number of jobs lost, it’s easy to understand how many taxpayers could find themselves with an IRS tax levy that puts them at risk of being homeless or going without food.

Before the IRS can release a levy due to financial hardship, the taxpayer will need to provide financial information that supports its position that the levy must be released. They can do this by calling the telephone number located on IRS tax levy paperwork or correspondence.  If the taxpayer has a revenue officer, they should reach out to the revenue officer to explain the financial hardship.

One thing to keep in mind is that if a taxpayer is successful in getting the levy released, the tax debt doesn’t go away. The taxpayer will still need to find a way to pay off the tax debt or else the levy might be reinstated. 

Tax Collection Assistance

The above is just a very high-level look at IRS liens and levies and how the coronavirus can affect the tax collection process. If you find yourself facing an IRS lien or levy, it’s a good idea to speak with a tax professional to get a better understanding of what your rights and legal options are.

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