Release of IRS Liens and Levies
Once the Internal Revenue Service has determined that a taxpayer has a tax obligation, the IRS will begin enforcing collection. To collect, the IRS can file a Notice of Federal Tax Lien, serve a levy on the taxpayer’s wages, personal property or bank account.
The Seattle area tax attorneys of Ortiz & Gosalia, PLLC, assist individuals and businesses in navigating, negotiating, contesting and appealing various IRS collection efforts.
Federal Tax Lien
A federal tax lien is placed on all of a taxpayer’s assets as soon as a tax is assessed and the taxpayer fails to pay the tax upon IRS demand. Generally, the tax lien lasts for ten years, running with the ten-year statute of limitation for collecting a tax liability. However, a federal tax lien and the statutory period for collecting a tax liability can be extended by events including a request for an IRS Collection Due Process hearing, a bankruptcy filing, or entering into a voluntary waiver with the IRS.
A Notice of Federal Tax Lien (NFTL) is filed to make the public and other creditors aware of the tax lien and to establish the government’s priority against other creditors or potential purchasers of a taxpayer’s property. The filing of a NFTL can also adversely affect a taxpayer’s credit score.
Taxpayer’s receiving a NFTL should consult a professional to confirm the validity of the lien by analyzing the procedures used by the IRS to file the NTFL, and the limitation period remaining for the lien. Further, the professional can help obtain a subordination or discharge of the lien allowing the taxpayer to refinance or sell the encumbered property. If a lien has not yet been filed, the professional can also propose other collection alternatives or file a Collection Due Process (CDP) Request.
The IRS has the authority to levy a taxpayer’s property. A levy is the actual attempt by the IRS to seize the property of a taxpayer held by a third party. The most common types of IRS levies include wage levies, bank account levies, and levies on a taxpayer’s securities and accounts receivables. If the taxpayer does not have financial assets sufficient to satisfy a delinquent tax liability, the IRS can also attempt to seize physical property directly from the taxpayer.
However, the tax laws provide for the release of a levy or seizure under appropriate circumstances. For example, a levy can be released by an IRS agent if the taxpayer proposes and enters into a suitable Installment Agreement, if the levy creates an undue economic hardship, or if the taxpayer qualifies for Currently Not Collectible status.
Collection Due Process (CDP)
Before attempting to levy a taxpayer’s assets, the IRS must send the taxpayer a Final Notice of Intent to Levy and Notice of Right to a Collection Due Process Hearing (a CDP Request). After issuing a Notice of Right to a CDP Hearing and receiving a CDP Request filed within 30 days of the notice letter, the IRS is required to schedule a CDP Hearing with an Appeals Officer. The Appeals Officer is required to be independent from IRS collection personnel and must verify that the IRS followed all administrative and procedural requirements; determine if the proposed IRS collection action balances the need for efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary; and consider all less intrusive collection alternatives proposed by the taxpayer in the CDP Request.
If the Appeals Office renders an adverse decision, the taxpayer may contest the decision by filing an appeal in the United States Tax Court or federal district court. Since the filing of a CDP request and its subsequent disposition halts IRS collection activity, the hearing is a right that should be strongly considered by taxpayers.
We welcome you to contact Ortiz & Gosalia with regard a tax levy, lien or other IRS collection matter. Call us at (425) 633-2004, send an email to firstname.lastname@example.org, or use our online form. With Seattle area offices in Redmond, Bellevue and Kirkland, we serve clients throughout Washington State as well as those located internationally or in other U.S. states.