The IRS just released just released data providing information about all things tax collection. Included in the data they released is information about tax liens and tax levies. It looks as though fewer taxpayers were assessed liens and levies in 2012 than in 2011.
What are Tax Liens and Tax Levies?
Tax liens and tax levies are consequences associated with non-payment of taxes. If you don’t pay your taxes, the IRS has recourse to try and get the money from you. This can include garnishment of wages, or withholding future tax returns. But the IRS can also file tax liens and serve tax levies.
A tax lien is a type of lien placed upon a property in an effort to secure tax payments. A lien is basically a type of security against property. When there is a lien against your property, the lienholder basically has the right to take your property if the obligation is not met.
If the IRS files a tax lien against your property, it now serves as security for your payment of taxes. If you remain delinquent, the IRS can seize the property and then sell it in order to recoup some of what you owe. In 2011, the IRS filed 1,042,230 notices of Federal tax liens. That number went down in 2012 by 32%. Last year, the IRS filed 707,768 such notices.
One the other hand, a tax levy is an actual action taken by the IRS. While a lien simply serves notice that your property is being used as security against what you owe in taxes, the levy is the actual seizure of property.
It’s important to understand that the administrative action taken by the IRS in the form of a tax levy does not require a trip to court. The U.S Supreme Court indicates that this type of action dates all the way back to 1791.
So, how does a tax levy fit in with the idea of due process guaranteed by the Constitution? Well, the IRS has to send you a notice of its intent to levy your property, and then give you the right to request a hearing within a 30-day period. There are a couple different ways that the IRS can levy assets:
- Seizure: This is the direct taking of assets from the taxpayer.
- Third-party: It’s also possible for the IRS to levy upon assets held by other parties. This means that the IRS can go after your bank accounts and investment accounts.
The number of levies in 2012 dropped from the 2011 level. Third-party seizures amounted to 2,961,162 in 2012, down from 3,748,884 in 2011, which represents a 21% drop. Seizures dropped to 733 in 2012 from 776 in 2011.
What Can You Do about Tax Liens and Tax Levies?
Recent changes to the lien system make it a little easier to avoid having a lien placed on your property. The dollar threshold at which liens are issued has been increased, and the process for withdrawing liens when taxpayers set up a Direct Debit Installment Agreement with the IRS to pay their obligations has been improved.
You can avoid a levy by setting up a hearing, and pleading your case. You can also enter a Direct Debit agreement to see your debt paid.
If you are having trouble paying your taxes, and are worried about liens and levies, you can get help from a tax profesional who can help you settle with the IRS, and represent your interests.