In the same way that a government can seize your property to pay off a debt, so can they hold your bank account or paycheck. Tax liens and wage levies are two ways the U.S. government can do this, but what are they, exactly? And, how can you defend yourself from the aggressive IRS?
Tax liens
People who owe taxes are often surprised to learn that they also have a tax lien against them. Tax liens can wreak chaos on your credit and cause you to lose your home, but there are ways to avoid them.
A tax lien refers to the government’s legal claim against your property or possessions for unpaid federal income taxes. The IRS can establish a lien on your property if you owe them more than $10,000 in taxes, penalties, and interest.
If you have unpaid taxes, the determined IRS will put a lien on any of your assets, such as real estate and/or vehicles, or any properties the IRS can find of yours that have value—including an individual’s wages. They may also sell off these assets to cover their costs — which means they would get paid first. This can leave you with nothing to sell once they’ve taken what they need to cover their costs. The IRS can then garnish your wages for the amount owed plus interest until the debt is paid off.
Once filed, tax liens remain on record for ten (10) years and then expire unless renewed.
You might not realize when you first discover you are behind on your taxes that one day soon, an IRS collection officer will show up at work asking for all of their money or else!
Wage levies
A wage levy is similar to a tax lien in that it’s an order from the IRS or state department of revenue to withhold money from your paycheck. In most cases, if you owe back taxes, you’ll receive a notice stating how much money is owed and how long the wage levy will last. Wage levies are often issued for smaller amounts than those associated with tax liens—usually $5,000 or less—but can go up to $10,000.
How long does a wage levy last? A wage levy typically lasts until all debts have been paid off or resolved by the government agency issuing them (such as when a taxpayer files for bankruptcy). While there’s no guaranteed time frame for this process, it typically takes anywhere from six months to several years before your wages are released from garnishment (when your wages are garnished).
How to avoid a tax lien or levy
If you’re a taxpayer, it’s essential to stay on top of your finances and ensure that you keep up with your tax obligations. It’s not uncommon for taxpayers to ignore the IRS, but this can have grave consequences. If the IRS cannot settle to an agreement with someone who owes them money, they will turn to more drastic measures—like filing liens or levies—to collect what they are owed.
Fortunately, there are ways for you to avoid getting caught up in these severe consequences:
⦁ File on time
You can avoid penalties. If you’re late, you might be charged a penalty by the IRS, so it’s important to make sure you don’t miss any deadlines! In addition, if you’re not eligible for an extension, there’s no reason to wait until the last minute!
⦁ Find out if you have an outstanding tax lien or levy before it’s too late.
You’ll be able to prepare yourself financially and emotionally before any legal action is taken against you—and thus avoid any undue stress or anxiety later on down the line.
Use IRS payment plans.
This is an excellent way for taxpayers working hard but struggling with finances to get caught up on their taxes without incurring interest or penalties for late payments.
Here are the most common tax debt relief programs offered by the IRS:
- Installment Agreement (IA)
This allows you to make monthly monetary settlement toward your outstanding tax debt balance over a period of time. - Offer in Compromise (OIC)
This enables you to settle your tax with the IRS for less than what you actually owe. - Penalty Abatement
This allows you to pay off your tax debt if you can present a reasonable cause for your inability to pay to the government. These payment plans have different qualifications based on your financial condition, ability to pay – may cover including your assets, how long you’ll be able to settle your tax liabilities, and etcetera. - Get help from a tax relief company.
Tax debt relief agencies are a great way to get help with your taxes. They can handle everything from preparing your taxes to any appeals that may come up. You might wonder if paying a professional to handle your taxes is worth it.
The answer is yes! Here’s why:
1. They have the expertise and knowledge to help you understand your tax situation and ensure you are getting the most out of what you deserve.
2. They can file for an extension on your behalf if you need more time to get everything together. This means you don’t have to worry about missing the deadline for your return, and you can focus on getting those returns done right!
3. They can help you figure out what kind of deductions and credits are available to you so that when it comes time for your refund check, there won’t be any surprises!
These can be devastating financial blows. Learn how to protect yourself.
You can get help with your tax debt by talking to an experienced tax professional from a trusted tax debt relief agency. Contact the IRS or use their online payment tool and ask for assistance in making arrangements to pay off your debt. Then, set aside funds each month to pay it off; don’t wait until next year when you may be able to afford more and settle your debts than you think now.
The sooner you start working on your taxes, the less time it takes them (or other agencies) to collect from you later. Avoiding wage levies and liens is easy if you take care of things immediately after receiving a notice of assessment or levy. Still, if they go too far into collections before being stopped, there will be severe consequences for both parties involved. You can lose possessions such as cars and houses due to back taxes, while collectors might suffer reputational damage because they were so slow in resolving this issue with their clientele.
Tax liens and wage levies are serious financial problems that can be avoided if you take action quickly. If you’re unsure whether one of these has been filed against you, call the IRS or check your credit report. If there’s been a mistake and they contact you, let them know immediately so they can correct it. If they haven’t got you but still think there might be an issue with your taxes or you are just simply in despair for a tax debt relief, contact a tax professional who knows how to handle these cases!
