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An IRS tax lien is simply the formal recording of a tax liability that arises automatically upon formal assessment of the tax. It is filed by the IRS in the county where the taxpayer resides. It becomes an encumbrance on all of the property then owned or acquired in the future by that taxpayer. The lien serves to place the government in a position of priority in relation to other creditors filing subsequent liens. Existing secured creditors such as mortgage lenders are not displaced by the IRS.
The IRS routinely files Federal Tax Liens in connection with accepted Installment Agreements — except some Agreements for fairly small tax liabilities established under the IRS "Streamlined" program to protect the IRS's interests during the payment period.
A Federal Tax Lien is a matter of public record and invariably appears on the taxpayer's credit reports, with obvious adverse consequences. The filing of a Federal Tax Lien also quickly results in a fold of junkmaii from "tax resolution" businesses who routinely use official-looking and threateningly-worded solicitations appearing to require immediate action to avert "further" IRS collection measures. In reality, the services such businesses claim to offer that have a legitimate chance of success can generally be provided more economically and more effectively by a competent tax lawyer who practices in this area.
The IRS may, in very limited circumstances, consider removing the lien if it can be proven that removal of the lien will assist the taxpayer in coming into compliance on their tax obligations — or if the lien is unlikely to yield any benefit to the IRS, such as where the taxpayer's debts far exceed the value of available collateral. Severe hardships, such as ineligibility for continued government employment, may also furnish grounds for exemption from federal liens. Although it can be initiated by completing and mailing a form and relevant documents, this is a complicated process which is unlikely to succeed without competent professional representation.
A levy is essentially the seizure by the IRS of property, including bank and investment accounts, and wages and other funds due the taxpayer. While there is no functional difference between a "levy" and a "seizure" by the IRS, a distinction is sometimes made between "levying" on money held by third parties, e.g., banks and employers, and "seizing" tangible property held by the taxpayer, houses and cars, which requires a subsequent sale to generate funds to apply to tax delinquencies. The IRS must take the proper steps to notify you that you will be subject to a levy except in emergency situations. A levy can be forestalled by a timely "Collection Due Process Appeal." The issue of whether proper notice was provided and whether or not the liability was properly determined are generally the only two avenues for appeal. The legality of a levy can also be challenged after the fact by a federal court action for "wrongful levy."
The most effective way to prevent a levy from occurring or to get a levy already in place released is to contact the IRS and request an Installment Agreement. Since full compliance with all tax return filing requirements is required to qualify for an Installment Agreement, it may be necessary to prepare and file federal tax returns for prior years to be considered. This is something our office can generally do on an expedited basis to speed up the levy-release process. The IRS will generally accept copies of returns filed directly at the IRS office without waiting for the tax returns to be fully processed, which, in the case of tax returns for prior years, can be a slow process.
Philadelphia tax attorney Joseph R. Viola has an ability to help taxpayers obtain relief from IRS liens and levies proven over many years and knows the ins and outs of these complicated government actions. If you have received notice that a Federal Tax Lien has been filed against you, or have received a IRS Notice of Intent to Levy your bank accounts or wages, contact Joe Viola for a consultation immediately.