If you have an issue with the IRS, you have probably heard about a lien and levy. Dealing with the IRS and understanding what the difference is can be frustrating and confusing. Here are how these collections actions might affect you and what the difference is between them.
- LIEN: The IRS can file a Notice of Federal Tax Lien to alert creditors that the government has a legal right to your property. When you don’t pay your tax debt, a lien secures the government’s interest. A lien can affect your assets, credit, business and bankruptcy. If you refuse to address your issue with the IRS, a lien will be filed after the following actions:
- Assessment of the liability
- Send you a bill that explains how much you owe
- You neglect or refuse to fully pay your debt in full or on time
Don’t let a Federal Tax Lien prevent you from leasing, purchasing a truck or home. By simply filing and paying your taxes you can avoid this lien.
- LEVY: This is a legal seizure to levy your property or wages to satisfy a tax debt. After you receive the Final Notice of Intent to Levy letter, the IRS has the right to collect the unpaid debt by pursuing a wage garnishment. The IRS contacts your current employer and tells them to forward up to 25%+ of your income. The withheld funds will be forwarded to the IRS and applied to your debt until paid in full.
- BANK LEVY: IRS can file a suit for a bank levy against one or all-active bank accounts. At the time the levy is received at your banking institute, the funds will be placed on hold for 21 days. In order to release the funds, a hardship will need to be shown to the IRS. If this cannot be done, the funds will be sent to the IRS after the 21 days and applied to the earliest year(s) with a balance due. A bank levy is a one time at service levy – the bank account can still be used for all other banking purposes during this period. No other funds will be held but be aware that the bank can also assess their fees.
If you feel like you can’t catch a break with the IRS – you might be in luck! As of May 2012, the IRS has announced more changes to a “Fresh Start” initiative. This program is designed to help struggling taxpayers make ends meet. Here are just some of the “flexible” provisions:
- INSTALLMENT AGREEMENT: The IRS now allows taxpayers to use streamlined installment agreements to catch up on back tax issues. The IRS explains that the threshold for using an installment agreement without having to supply the IRS with financial information has been raised from $25,000 to $50,000. Also, the taxpayers who owe up to $50,000 will now be able to enter into a streamlined agreement. The streamlined installment agreement has been raised to 72 months from the current 60 months allowing you more time to pay and possibly a lower monthly payment.
- OFFER IN COMPROMISE: An Offer in Compromise (OIC) allows you to settle your debt with the IRS for less than the full amount owed. An OIC is based on your ability to pay and your reasonable collection potential (RCP). A review of income, expenses and assets will be reviewed to decide if you are a good candidate for an OIC.
Think you might qualify for an OIC? You should contact a business service provider who specializes in IRS Resolution for owner-operators. ATBS offers a free consultation to discuss your case details and determines what will be the best source of resolution based on your case. Our Tax Resolution teams assist drivers every day with these issues. Call and speak with a Tax Resolution specialist today, (866) 431-2439.
By simply filing and paying your taxes on time, you can typically avoid issues with the IRS. If you do get into a situation where you cannot pay your taxes, work with a business service provider to come up with the best solution so your can keep your business running for the long haul.