The Differences Between a Tax Levy and a Tax Lien

Levies and liens are two of the tools that the IRS uses to collect debts owed by taxpayers. Both can adversely impact the taxpayer, but there are procedures by which both can be released or removed.

A tax levy, as defined by the IRS, is the legal seizure of your property in order to satisfy a tax debt. Some property that can be seized by the IRS and sold to pay off the debt is your home, car or boat. The IRS can also levy wages, retirement accounts, rental income, and even the cash loan value of your life insurance.

If the IRS issues a notice to you that it intends to seize your assets, you have 30 days to challenge the levy or to attempt a resolution through a payment plan or by paying the amount you owe in full. If you need additional time to consider your options or to arrange payment, you can file for a stay of collections that will allow you an additional 90 days.

The IRS may also opt to release a levy if it determines that the levy would create an immediate economic hardship. While this release doesn't mean you don't have to pay the money, it does allow for you to work toward a resolution with the IRS.

A tax lien gives the government a legal claim to your property. Unlike a levy, the lien doesn't grant possession of your assets, but merely grants the rights to receive any income you receive from the selling of those assets in order to satisfy your debt. Having a lien placed on your property is harmful to your credit and may make it difficult for you to do business or to sell your assets.

A new tax policy allows for the process of "withdrawal" from a lien when the debt is paid in full or the taxpayer has enrolled in a payment plan that -- once completed -- will result in the debt being paid. Withdrawal of the lien causes the bad information to come off the taxpayer's credit report faster than any other detrimental issue. It is important to note, however, that the withdrawal process only applies to federal tax liens. State-level liens will remain as negative information on your credit report.

You may also have the opportunity to have the tax lien removed if you can prove in court that the tax has already been paid, the IRS failed to followed proper procedures, you were in bankruptcy when the lien was filed or the statute of limitations on collecting the debt has already passed.

If you have received a notice of the government's intent to file a levy or a tax lien, it is important to act right away in order to avoid the consequences of these actions. Optima Tax Relief has experience working with the IRS and can help you find relief from a tax debt by negotiating a solution for you. For a free consultation and to learn more about your options for resolving your tax debt, contact us.

Devin Finley is a freelance writer and tax relief expert. Devin writes on a multitude of financial and legal topics. He enjoys collaborating and strategizing with other professionals to ensure tax & debt clients receive competent and beneficial representation. For more information Visit http://optimataxrelief.com/

Getting Proactive Will Help You Avoid an IRS Tax Levy

If you have received an IRS final notice of an impending tax levy, you have undoubtedly not been answering your mail. Once that levy descends on you, its icy fingers can freeze your bank account, seize your personal and real property and essentially put everything you have at the service of the IRS until the debt is paid.

 Before the foregoing disastrous scenario plays out, and while there’s still time, you can avoid a tax levy through a number of proactive measures on your part:

• Do not ignore the IRS notices. If you get into what is known as the “IRS notice stream” and do nothing, the IRS occupies the high ground, and you have lost time. When you receive the first notice, follow the instructions and get busy clearing up the problem.
• Talk to the IRS rep and see about arranging a time payment agreement. The recent IRS Fresh Start Initiative might help in making it easier for you to arrange direct debit payments.
• Look into the IRS Offer in Compromise as a possible way of reducing the amount of tax you owe. If you are truly financially destitute and do not have the assets that can be liquidated to settle your debt, you might qualify.
• Don’t stall. If the IRS determines that you are dragging your feet, they have the option to immediately impose the levy, even while considering your request.

 On the other hand, if you believe your tax levy is based on an IRS mistake, get some professional tax assistance. Log on to Optima Tax Relief for a free assessment. For More Information Click Here.

IRS Fresh Start Initiative Reduces Number of Liens Filed

If an individual fails to pay his or her tax debt, and is facing an IRS audit, a federal lien may be filed against the individual's property. And property doesn't just mean one's home. It means virtually everything a person owns -- real estate, financial assets and even vehicles—is at risk.

Formerly, a Notice of Federal Tax Lien -- which alerts creditors that the government has a legal right to the property owned by the taxpayer -- could be filed by the IRS when the taxpayer's debt had reached $5,000. However, due to the IRS Fresh Start Initiative, the threshold for filing the Notice of Federal Tax Lien is now $10,000. And while the notice may still be filed at a lower amount, it isn't an automatic process as it was before.

According to a Huffington Post blog by Steve Rhode, the changing of the rules two years ago regarding when the lien can be filed has resulted in dramatically fewer filed liens. 32 percent fewer from 2011 to 2012, in fact. And that's a good thing for taxpayers, Rhode wrote, as having a Notice of Federal Tax Lien filed against you can result in a loss of an average 100 points from your credit score. A Notice of Federal Tax Lien is public record and in some cases, it can also reduce your ability to secure and maintain credit or even impact your ability to get a job.

If you are facing tax debt, there are other important components of the Fresh Start Initiative that may also help you, including the waiver of penalties in some cases, a streamlined process for making an Offer In Compromise, and new guidelines for Installment Agreements.

If you want to know if you qualify for assistance through the Fresh Start Initiative and begin working toward a solution for your tax debt, let Optima Tax Relief help you. Contact us today.Top of Form

Author:

Devin Finley is a freelance writer and tax relief expert. Devin writes on a multitude of financial and legal topics. He enjoys collaborating and strategizing with other professionals to ensure tax & debt clients receive competent and beneficial representation. For more information Visit http://optimataxrelief.com/

A Tax Levy Never Comes Without Warning

If your tax return has been audited and the IRS finds that you owe the government, you will receive the equivalent of a “shot across the bow” -- a formal notice and demand for payment. If you ignore the subsequent final warning, the IRS brings out its “big gun,” the tax levy.

 Unlike its homophone levee, an embankment built to contain flooding, an IRS levy can inundate your bank, your employer and others who control funds on your behalf. The IRS simply seizes or freezes your assets -- cash and other property -- in payment for back taxes.

 Your bank manager and employer have no choice but to comply. Your bank must freeze your accounts, and your employer must start deducting from your pay.

 So the best advice when it comes to avoiding a levy is this: read the IRS notice carefully and do not procrastinate. The notice will specifically tell you that the IRS intends to issue a levy against your property or rights to the property because you have a balance due on your tax. It will also indicate the amount of the payment due, when it is due along with payment options. 

 At this point, the IRS will immediately begin searching for other assets you have -- retirement accounts, business accounts receivable, stock dividends, cash loan value on your life insurance, to name a few.

 Before that final notice comes in and time runs out, you should consider getting some professional tax assistance. If you’re facing a tax levy or lien, you can get help and expert representation at Optima Tax Relief.  \
For More Information Click Here.

The IRS Tax Levy Casts a Wide Net

What is an IRS tax levy, and what can it do to your financial health? A tax levy is a legal seizure of your assets for nonpayment of taxes. The levy gives the IRS the power to seize and sell off your property, freeze your bank accounts and make a claim on your paycheck. A levy differs from a lien, in that the latter is a legal claim on your property that prevents you from selling it without giving the IRS its cut first.

 So as far as your financial condition is concerned, a levy actually subtracts from your net worth. The tax people take over your property and sell it out from under you. Levies even extend to any cash value of an active life insurance policy, giving credence to the claim that when it comes to tax delinquency the IRS may not own your soul, but it has a big claim on your body.

 If the IRS audits your tax return and determines that you owe more, you will receive an official Notice and Demand for Payment. Ignore the notice or refuse to pay the bill and you can expect another formal notice with the dauntingly long title Final Notice of Intent to Levy and Notice of Your Right to A Hearing (short title: levy notice).

 You should at this point actually take notice, because you have 30 days before the IRS starts coming after your property. There are ways to get a tax levy lifted, and we at Optima Tax Relief can help. Check us out and get a free assessment from one of our senior tax experts. For More Information Click Here.

Your Pathways To Settle Your Tax Debt

If you are on the receiving end of a final formal notice from the IRS, you have no option other than to settle your tax debt. Your first and best option in avoiding tax levies or IRS liens on your property is obviously to pay up. Unfortunately, you have probably arrived at loggerheads with the tax people because you cannot pay.

But you have options in seeking tax debt relief, and they all involve working closely with the IRS and surrendering to the inevitability that at least some of that debt must be discharged. You can (1) work out a time payment/installment plan with the IRS or (2) submit an Offer in Compromise. Before you can pursue either path, the IRS requires that you:

• File all your tax returns.
• Investigate and consider every other resource you have -- loans, credit card, property you can sell -- to pay off your tax debt. Considering that a tax levy would go after all your assets, you might as well do this yourself before that happens.

 How to apply for an installment agreement

• You can apply online if your tax debt (combined with penalties or interest) is $50,000 or less.
• You can contact the IRS office by calling the number on your bill or notice.
• You must complete their Form 9465, Installment Agreement Request (and Form 433-F, Collection Information Statement if you owe more than $50,000.)

The IRS charges application fees of $52 for direct debit, $105 for a payroll deduction agreement and $43 if your income is below a certain level.

How to apply for an Offer in Compromise

You can settle your debt for less than the full amount you owe by applying for an Offer in Compromise. Your first step is to make sure you are eligible. Go on line to the IRS webpage and complete the Offer in Compromise Pre-Qualifier.

If you are eligible, you can find the step-by-step instructions and the forms you need by going to the links on the IRS webpage Offer in Compromise. You’ll also need to enclose a $150 non-refundable application fee as well as an initial tax installment payment. You can choose a lump sum cash or periodic payment option, but each option chosen must be accompanied with a check.

How to proceed if you have doubts as to your tax liability

The IRS Offer in Compromise webpage has a link to its Form 656-L, Offer in Compromise Doubt as to Liability. It discusses the process and is well worth reading through. The most telling caveats in the document are these:

“You must provide supporting documentation or evidence that will help the IRS identify the reason(s) you doubt the accuracy of the tax debt.

And

“You must include a written statement explaining why the tax debt or portion of the tax debt is incorrect.”

Those two statements alone might convince the average taxpayer that it is time to get some expert tax debt relief help. If you fall within the average taxpayer category, don’t feel alone. The IRS rides herd on a vastly complex Tax Code, along with its own detailed regulations and procedures designed to protect the IRS and its ability to collect revenue.

Given that the auditor, although probably a very nice person, has the job of making you pay up, you should consider getting tax debt relief advice from someone who has your interests foremost. Get your free tax consultation from Optima Tax Relief and start down the road to clearing up your tax debt problems.

An Offer In Compromise Might Be a Path to Significant Tax Debt Relief

The IRS can be a steamroller when it comes to collecting back taxes. Taxpayers who ignore IRS notices do so at the risk of levies and liens that amount to crippling economic sanctions that will not go away until the debt is settled. On the other hand, the IRS does recognize that true financial hardship can reduce the likelihood of debt collection, in which case an Offer in Compromise could result in a substantial reduction in a tax debt.

Qualification criteria

Before a taxpayer can be considered for an Offer in Compromise, all tax files must be up to date. Also, undergoing a current bankruptcy proceeding is also a disqualifying factor. A taxpayer can get a preliminary determination on potential eligibility by completing the IRS Offer in Compromise Pre-Qualifier online.

What happens next

The IRS has a step-by-step booklet (Form 656-B) and an accompanying video. The steps require an honest disclosure of everything about the taxpayer’s financial situation -- income, assets, liabilities, expenses -- and the IRS uses a calculation to determine the maximum reduction for which the taxpayer can qualify.

The next step is to complete the forms required by the IRS and select a payment option that could include:

• lump-sum offer -- an initial payment of 20 percent of the total amount offered in compromise must accompany the offer.
• periodic payment -- an initial payment of the amount offered must accompany the offer.

Each of those options is in addition to the non-refundable $150 application fee, unless the taxpayer meets the IRS Low Income Certification guidelines.

What About the IRS Fresh Start Initiative?

In recent hard economic times the IRS had to ease up on citizens and businesses having difficulty paying back taxes. In addition to waiving some late penalties, the IRS streamlined the Offer in Compromise process and eased up on some of its rather inflexible determinations of value of assets and liabilities such as living expenses.

When in doubt…

The Fresh Start Initiative notwithstanding, you might have some valid doubts as to the actual amount of your adjudicated tax liability. Check out IRS Form 656-L, Offer in Compromise (Doubt as to Liability), which might not be all that helpful to the average non-expert layman. Reading that publication might be just the motivation you need to get some expert tax help.

That expert tax help is right here at Optima Tax Relief. We can help. Just tell us how much tax debt you have, what state you live in and you’ll qualify for a free evaluation by one of our Senior Tax Professionals.