IRS Forced Collection

If you owe the IRS money and you’re not making any payments, eventually the agency will kickstart the process of a forced collection. After thoroughly chasing you for payment with no result, the IRS will resort to the lien and levy procedures and seize your finances and property to cover the debt. Daily & Toups can help you react to an impending lien or levy on your property and negotiate with the IRS for the least damaging resolution. Contact us for a free consultation. We’ll review your case and provide you with a range of options for dealing with the IRS.

NOTICE OF FEDERAL TAX LIEN

The IRS is going to let everyone know about your tax debt
When you repeatedly ignore the IRS notices and demands to pay your taxes, the agency will bring forward a claim known as a tax lien.

If you don’t take action, the IRS will file a Notice of Federal Tax Lien, making your tax debt public knowledge. The notice is injected into the public records and attaches to your name, property you own and any other assets you have rights in. From this moment forward, any credit report or background check will show that you owe the IRS X amount of money.

Potential creditors and lenders will see the tax lien in your records and may impose higher interest, limit the amount you can borrow, or deny you service entirely. If you try to sell a property, its title will show the tax lien. Any buyer will have to take the property with the lien attached. This will either force you to sell at a major discount or pay off the IRS first.

A tax lien will stay on your record until every nickel is paid off to the IRS. In addition, it will always display the full amount owed until it is removed. So, even if you have $10 left to pay, the tax lien may still show $100,000, for example.

While this is certainly an unpleasant situation, a tax lien is just a public record of your tax debt. If you still don’t comply, the IRS will proceed with a forced collection on your assets knows a a tax levy.

TAX LEVIES

The IRS has the powers to seize your assets in order to repay your tax debt. You will first receive a letter of Intent to Levy. It will explain in detail how much you owe, how the levy procedure works, what payment alternatives you have and your rights of appeal.

After 30 days go by, the IRS will proceed with the levy. They will start with any money you have in the bank – savings, deposits. If those are not enough, or you don’t have any, the IRS will proceed with your physical property.

There is a protected list of items and minimum quantity the IRS can’t take. However, it doesn’t amount to much:

  • Clothes and school books. Excludes luxury apparel of substantial value.
  • $7,700 worth of personal items, fuel, provisions, furniture, and livestock – if you are a farmer.
  • $3,860 worth of business equipment, books and other items that are required to practice your profession.
  • A minimum exemption amount for wages, salary, and other income.
  • 85% of unemployment benefits; workers’ compensation benefits and court-ordered child support.
  • Railroad Retirement Act and Congressional Medal of Honor benefits. Other pensions and retirement plans are not exempt.
  • Most forms of public assistance payments, such as welfare and SSI.
  • Some service-connected disability payments.

A minimum portion of your wage will be exempt from collection. If you don’t have a family dependent on you, that amounts to $172.12 per week (in 2008). Everything else, the IRS can take. Many forms of benefits and public assistance will be exempt or partially exempt.

The IRS will prioritize some assets over others. Typically your only home and vehicle you use for work will be avoided by collectors. But if you cannot cover your debt with anything else, eventually, a court order will allow the IRS to seize your residence and make you homeless.

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