Facing tax issues with the IRS can feel overwhelming, especially if you’re dealing with a tax lien or levy. These actions are serious, and understanding what the IRS can and cannot do is critical to protecting your assets and resolving the problem quickly. The good news? With the help of a qualified CPA, you can take steps to address the situation and get back on solid financial ground.
What Are Tax Liens and Levies?
First, it’s important to distinguish between a tax lien and a tax levy:
- Tax Lien: A lien is a legal claim that the IRS places on your property (real estate, financial accounts, etc.) when you fail to pay your tax debt. This claim ensures the IRS has the right to your property if you sell it before you pay the debt. While it doesn’t mean the IRS will seize your property, it can seriously impact your credit and make it harder to sell or refinance assets.
- Tax Levy: A levy goes a step further. When the IRS levies your property, they take (or freeze) your assets to satisfy your tax debt. Frozen or seized assets could include your wages, bank accounts, real estate, or even personal property. A levy is usually the IRS’s last resort after sending multiple notices about your unpaid tax debt.
What the IRS Can and Cannot Do
The IRS has broad powers when it comes to collecting unpaid taxes, but there are limits to what they can do, and they must follow specific procedures before taking action.
What the IRS Can Do:
- File a Tax Lien: If you owe taxes and don’t pay after receiving a bill from the IRS, they can file a tax lien against your property.
- Levy Your Wages or Bank Accounts: After providing proper notice, the IRS can levy (take) your wages, money from your bank accounts, and other assets to cover your unpaid taxes.
- Seize Property: In extreme cases, the IRS can seize and sell your property, such as cars or real estate, to pay your debt. That said, such steps are rare and only happen after multiple attempts to collect the debt have failed.
What the IRS Cannot Do:
- Seize Necessary Living Expenses: The IRS cannot seize items that are essential to your well-being, such as a portion of your wages needed for basic living expenses, your primary residence (in most cases), or tools required for your job.
- Take Action Without Notice: Before filing a lien or levying your assets, the IRS must send you a series of notices, giving you time to respond or take action.
- Take Everything: The IRS is bound by specific rules about how much they can take, ensuring you’re not left without essential resources. For example, they cannot levy more than a certain percentage of your wages, leaving enough for basic living expenses.
How a CPA Can Help You Navigate IRS Tax Issues
Dealing with the IRS on your own can be intimidating, especially when you’re facing liens or levies; this is where a CPA can be invaluable. Here’s how they can help:
- Review Your Situation: A CPA will assess your financial situation and identify the root cause of the lien or levy. They’ll help you understand how much you owe, why the IRS has taken action, and what steps you can take to resolve the issue.
- Communicate with the IRS: Timing and clear communication are critical when dealing with the IRS. A CPA will handle correspondence with the IRS on your behalf, ensuring that all necessary information is provided and deadlines are met.
- Set Up a Payment Plan or Offer in Compromise: A CPA can help you negotiate with the IRS, whether through setting up a manageable payment plan or submitting an Offer in Compromise, which allows you to settle your tax debt for less than the full amount owed.
- Prevent Future Issues: Once the immediate problem is resolved, a CPA can help you put systems in place to prevent future tax issues, whether through better tax planning, budgeting, or setting up quarterly tax payments.
Don't Go it Alone: Let a Tax Resolution Expert Represent You
Tax liens and levies are serious but don’t have to be permanent. With the help of an experienced CPA, you can resolve the issues that led the IRS to take action and protect your assets from further impact. At Myrick CPA, we specialize in helping individuals and small business owners manage their tax issues and create a path to financial stability.
Need help resolving tax liens or levies? Contact Myrick CPA today to schedule a consultation. Our team of experts will work with you to find the best solution for your situation.
