How To Stop IRS Collections, Liens, and Levies

Receiving a notice from the IRS about a tax debt can be terrifying, especially when it mentions collections, liens, or a levy on your assets. These are serious threats, and you should take them seriously. The good news is that you have rights and options to help you put a stop to the government’s collection activity.

This article examines and explains the powerful tools the Internal Revenue Service has at its disposal. We will also discuss your options for resolving your outstanding tax debt.

If you’re currently dealing with aggressive collection action by the IRS, consider contacting a local tax attorney. They’ll help protect your rights and, if necessary, negotiate a payment plan or settlement on your behalf.

The Internal Revenue Service’s Power To Collect Unpaid Taxes

Once the IRS determines you owe a tax debt, it has powerful tools to collect that money. If you ignore the initial notices, the process will escalate to aggressive measures such as filing a public lien against your property or levying a lien on your bank account. Methods include:

• Collection activity
• Bank levies
• Property liens
• Wage garnishment
• Asset seizure
• Possible criminal charges

The good news is that you have legal rights and options to stop this process. Ignoring IRS notices can be a poor choice, so it’s important to know how to respond. This guide explains the immediate steps you can take to protect your property, bank accounts, and wages from the IRS.

For our purposes here, we will focus on tax liens and bank levies. However, when you meet with an attorney to discuss your tax issues, know that these are all possible consequences of owing back taxes.

How Long Does It Take for the IRS To Start Debt Collection Activity?

When you file your federal income tax return, you are supposed to submit payment for any tax due. If you fail to do this, the government will give you a month or two to pay your outstanding tax bill. About 60 days after the IRS assesses the taxes you owe, it will send a notice of taxes owed along with a demand for payment.

If you fail to respond to the IRS notice, the revenue officer handling your case will escalate matters by commencing collection actions. This begins with dunning letters and notices about any accrued interest and penalties, but will ramp up collection efforts to include federal tax liens, bank levies, and wage garnishments.

If you want to avoid collection activity, contact the IRS office handling your case and either make a tax payment or negotiate some other solution. It’s at this point that an experienced tax attorney or a taxpayer advocate service can prove invaluable. They have years (or decades) of experience dealing with the IRS and are aware of any available tax relief.

Understanding the Threat: Liens vs. Levies

The IRS collection process will escalate. The two most serious actions you may encounter are the filing of a lien and the issuance of a levy. It’s crucial to understand the difference between the two.

Notice of Federal Tax Lien

A tax lien is a legal claim the government files against your property when you have an unpaid tax debt. It’s a public record that alerts other creditors that the IRS has a right to your assets.

A lien can damage your credit and make it difficult to sell property, but it doesn’t automatically mean the IRS intends to seize your property. It’s more like the government’s final warning shot.

If the government has not yet placed the lien or levy on your property, your tax attorney may be able to negotiate a settlement or payment arrangement. If this happens, you may be able to avoid the lien/levy.

If the lien or levy is already in place, your attorney will try to convince the IRS to issue a levy release. They can do this by negotiating another solution to your outstanding tax debt.

IRS Tax Levy

A tax levy is more serious than a tax lien. With a levy, the government actually seizes your property to satisfy the tax debt. If you don’t respond to the tax lien and other notices, the IRS can and will take your assets.

This can include the following:

• Garnishing your wages (taking money directly from your paycheck)
• Levying your bank accounts (freezing and taking the funds)
• Seizing and selling your personal and real property, including homes and vehicles
• Intercepting your future state and federal tax refunds

Once a levy is in place, it can be extremely difficult to get it released. This is why it’s crucial that you work hard to stop the levy before it even starts. An experienced tax lawyer can help you do this.

How To Stop a Levy Before It Starts

When the IRS plans to start the process to seize your assets, it must first send you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. This document is your last warning and triggers a critical 30-day window to request a “Collection Due Process” (CDP) hearing with the IRS Independent Office of Appeals.

Filing a timely CDP request is the legal “stop button.” By law, a CDP hearing prohibits the IRS from proceeding with its levy until after the hearing. This gives you and your attorney time to negotiate a solution without worrying about the immediate threat of seizure. Missing this 30-day deadline means you lose your automatic right to appeal to the U.S. Tax Court.

Payment Options and Resolving Your Tax Liability

The CDP hearing is the formal venue where your attorney can present your case to the IRS and negotiate a resolution. Before the government considers any of the below options, you must complete the IRS Collection Information Statement (CIS).

The CIS provides the IRS with your financial information. The government relies heavily on your CIS when determining your eligibility for a payment plan, Offer in Compromise, or Currently Not Collectible Status.

Specifically, you must submit the following information in your CIS (Form 433-F):

• Income
• Expenses
• Assets
• Liabilities

Based on the information you provide in your CIS, the government may approve one of the options below.

Installment Agreement (Payment Plan)

This is the most common solution. An installment agreement is a formal plan with the IRS to make manageable monthly payments toward your tax debt. As long as you make your payments on time, the IRS will cease all other collection actions. An attorney can help negotiate a payment amount that fits your budget.

Offer in Compromise (OIC)

An OIC allows eligible taxpayers to settle their tax debt for less than the full amount owed. The IRS evaluates OICs on a case-by-case basis. To qualify, you must prove, through detailed financial disclosure, that you do not have the income or assets to pay the full amount.

An OIC is a complex legal negotiation. The assistance of an experienced tax attorney significantly increases the likelihood of an offer being accepted.

Proving Financial Hardship (Currently Not Collectible Status)

If you can provide compelling evidence that paying your tax debt would prevent you from meeting basic, reasonable living expenses, you can request that the IRS place your account in Currently Not Collectible (CNC) status. This will pause collection actions, including levies.

Be aware that under a CNC, your debt does not go away. While it provides temporary relief, interest and penalties continue to accrue. The IRS will review your financial situation to see if your ability to pay has changed.

Can You Dispute the Alleged Estimated Taxes Owed?

If you disagree with the amount of tax the IRS alleges you owe, you do have recourse. You can respond in writing to the original notice of tax deficiency. You can also request a reconsideration of the tax debt. When you do so, remember to include all supporting documentation.

If the IRS doesn’t agree with your dispute, you can file an appeal with the IRS Independent Office of Appeals. This panel will take a second look at your reconsideration request and make its own determination as to the debt’s validity.

If this doesn’t work, you can opt to petition the tax court for a final review. However, this is a last resort and, unless you owe a significant amount in back taxes, not the most prudent move.

If you choose to dispute the debt, you may want to consult an experienced tax attorney. The tax rules are complex and ever-changing, and having a skilled tax professional in your corner is a good idea.

Your Rights When Dealing With the IRS

The Taxpayer Bill of Rights offers all taxpayers certain protections when dealing with the Internal Revenue Service. These rights often come into play when you owe past taxes or dispute an alleged tax bill.

Some of the more relevant protections afforded by the Taxpayer Bill of Rights include the following:

• You have the right to professional representation: You do not have to speak to the IRS alone. An attorney can handle all communications and protect your interests.
• Your conversations with an attorney are protected: Attorney-client privilege ensures your discussions are confidential, which is critical if you are concerned about potential wrongdoing. This privilege generally does not apply to CPAs or other tax preparers.
• You will not go to jail simply for being unable to pay: The IRS cannot imprison you for owing money. Criminal charges are reserved for illegal acts like tax evasion or fraud.

If you are facing an IRS tax levy, lien, or other collection action, the time to act is now. Contacting an experienced local tax attorney is often the wisest step you can take to protect your assets, understand your options, and resolve your tax debt on the best possible terms.

Contact a Local Tax Attorney for Help With Your IRS Debt

Owing the IRS money is never a good thing, but it happens. The government doesn’t really care why you owe the money, only that you pay it. There are times, however, when you simply can’t afford to pay the past-due amount in full.

The IRS offers several options for resolving overdue tax liabilities, including payment plans and an Offer in Compromise. You can also ask that the agency declare you uncollectible. It all depends on how much you owe and what your financial situation is at the time you receive the notice.

To increase your chances of avoiding late fees, interest, and penalties, consider talking to an experienced tax attorney near you. Whether you owe federal or state tax, a skilled tax lawyer can help you resolve the issue quickly and in a way that you can afford.