In November 2020, the IRS debuted new options designed to help Americans settle back taxes. These options are welcome and important and can help Americans protect their homes and finances.
They do not, however, reduce most Americans’ need for the assistance of an IRS attorney. Keep reading now to learn how an IRS attorney in Virginia can help you favorably resolve an IRS tax lien or levy.
Tax Liens vs Tax Levies
Both tax liens and levies are tools the IRS can use to collect unpaid monies that taxpayers owe. While they are often discussed together, there are important differences between them.
Liens
When you rack up debt with the IRS, the agency will not necessarily make an immediate move to collect that money. It will, however, take steps to ensure that it will receive its money sooner or later.
One of the most common first steps is to apply a lien. A tax lien is a legal claim to your assets. Liens are most often applied to physical property such as real estate.
Liens can:
- Damage your credit score
- Make it more difficult to sell your property
- Apply to the property you own now and any property you may acquire later
If you attempt to sell your property before paying off or resolving the lien, the money you owe to the IRS will be taken off the top and paid to the agency before you see a dime. In this way, liens ensure the eventual payment of IRS back taxes.
Levies
If liens are the IRS’s long-game, levies are its immediate action option. The agency can use levies to actively pull money out of your assets to repay your debts. Commonly targeted assets include:
- Real estate
- Vehicles
- Paychecks
- Bank accounts
- Business assets
- Social Security benefits
- Retirement accounts
Levies come in multiple forms. For instance, the IRS can seize and liquidate property to cover your debts. It can also choose to garnish your wages or accounts over time until your debt is fully paid off.
Some assets are exempt from IRS levies, including:
- Workers’ compensation benefits
- Qualifying pension or disability benefits
- Unemployment benefits
- Qualifying personal and household possessions
Taxpayers may be surprised and dismayed by the IRS’s choice of levy options and the results.
Taxpayer Options When Facing Liens and Levies
Obviously, taxpayers can resolve a lien or a levy at any time by paying the amount they owe the IRS in full. Of course, few Americans hit with liens or levies can afford to do this. Fortunately, there are other options.
Payment Plans
In many cases, taxpayers can arrange with the IRS to pay off their debts over time. These arrangements have both benefits and drawbacks.
On one hand, payment plans allow taxpayers to have a say in structuring payments rather than having their assets garnished at the IRS’s whim. Having a payment plan in place can also allow taxpayers to sell or transfer their assets without IRS intervention or involvement.
Taxpayers with payment plans may also be able to get levies removed, which protects their credit scores and ratings.
On the other hand, unfortunately, interest and penalties on the tax debt keep accruing over the lifetime of the payment plan. Thus, long-term payment plans can result in taxpayers paying hefty fees atop their original debt.
Appeals
Taxpayers who believe they do not or should not owe the money the IRS claims that they do have the option to file an appeal. The IRS Office of Appeals will then review the case and determine if errors have been made.
A Note About Filing For Bankruptcy
Many Americans believe that they can discharge large debts they owe to the IRS by filing for bankruptcy protection. Sometimes this is true. But more often it is not true.
Tax debts for which the IRS has already filed a tax lien are among the types of debt most difficult to discharge during bankruptcy. Filing for bankruptcy can, in fact, make matters worse in many cases. Before you file for bankruptcy if you have any tax debt, consult with a knowledgeable tax lien attorney about your particular situation.
How a Virginia Tax Attorney Can Help
The basic options for resolving a tax levy or lien can appear straightforward. In practice, choosing the best option for your situation can be difficult.
Circumstances can be complicated by:
- Which assets the IRS applies liens or levies to
- Complicated personal or business finance situations
- Improperly filed or unfiled tax returns
- Other financial happenings or commitments, such as bankruptcy or divorce proceedings
- The need or desire to liquidate assets subject to lien
Even once you choose a course of action, the process can be complex or confusing. Few Americans are familiar enough with the IRS, its rules, and the options it offers to navigate payment plans or the appeals process smoothly.
In every case, hiring a Tax Attorney in Fairfax can help you achieve the best possible outcomes.
An IRS tax lien attorney can help you:
- Understand your options
- Understand the potential ramifications of each option on other areas of your life and finances
- Help you navigate the application process for the option of your choice
- Save you time and money by ensuring that each step of the process is completed correctly on the first try
An IRS tax levy attorney can also interact with the IRS on your behalf. This spares you the stressful and time-consuming work of dealing with the appeal process yourself.
A Note About Timing
When it comes to handling money owed to the IRS, timing matters.
The best time to take action is when you realize you owe the IRS money and you cannot immediately pay the full amount. The second best time to take action is when you first receive notice from the IRS that you owe money. The longer you wait to take action, the more likely it is that:
- Your options narrow
- The IRS will take actions such as applying liens or levies
- Interest, penalties, and fees will accumulate, driving up the total amount owed
Even if you believe the IRS is wrong about what you owe or you know you cannot pay what you owe, it is essential that you contact an attorney for assistance as soon as possible. Doing so will give you the most options and the best chance for a great resolution.
Addressing an IRS Tax Lien or Levy
If you are facing an IRS tax lien or levy, don’t feel that you need to handle the situation alone. Schedule a consultation today and let our experienced attorneys help you resolve your tax situation in the best way possible.
