What Collection Actions Can IRS Revenue Officers Take Against Delinquent Taxpayers?
Part 2 – How Do IRS Revenue Officers Collect Tax Debts?
The Strong Arm of IRS Revenue Officers
In part 1 of this two-part series, the Tax Resolution Institute provided an understanding of IRS revenue officers and an explanation of their role as tax collectors. In part 2, the collection actions that IRS revenue officers can take against taxpayers with delinquent IRS income tax debts will be explored in short descriptions of each action.
It is important to understand that you do not want such collection actions taken against you. If you have a delinquent IRS income tax debt and you need help paying your tax bill, do not hesitate to get in touch with the tax resolution professionals at TRI.
4 Key IRS Collection Actions Taken By IRS Revenue Officers
1) Federal Tax Lien
When taxpayers have IRS delinquent tax debts and they have ignored initial attempts by the IRS to collect the back taxes owed, IRS revenue officers will take the real collection action of filing a Federal tax lien. An alert that a Notice of a Federal Tax Lien has been filed will be sent to you in the mail. A Federal tax lien means that an official Notice of a Federal Tax Lien has been filed with the local County Clerk where you reside or in the county where your business operates.
As a public record, a Federal Tax Lien is a recording of the back tax debts of a taxpayer that are owed to the IRS. Such a public notice reads: “There is a lien in favor of the United States on all property and rights to property belonging to this taxpayer for the amount of these taxes, and additional penalties, interest and costs that may accrue”. A Federal tax lien immediately affects your credit history and stands as a potential alert to the general community of your IRS tax problems.
2) IRS Bank Levy
If you do not respond to a Federal tax lien, the IRS will levy your bank accounts. IRS revenue officers use bank levies to access funds directly from your personal accounts. If you have received an IRS Notice of a Bank Levy, time is of the essence. When IRS revenue officers issue an IRS Bank Levy, your bank is legally obligated to freeze all of your accounts for 21 days.
During this three week period, you have the opportunity to resolve your delinquent tax debt. After the 21 days pass, the bank sends the IRS whatever funds are in your account to cover your tax debt. If there is enough money in your bank account to cover the entire tax debt, this amount will be sent to the IRS. Once the bank has sent funds to the IRS, it is almost impossible to obtain a refund.
3) Wage Garnishment or Paycheck Garnishment
If the IRS announces that they are going to garnish your paycheck, it is bad news across the board. For IRS revenue officers, a wage garnishment is very effective way to collect a delinquent income tax debt. The revenue officer will notify your employer of the garnishment, informing your employer of your unpaid tax debt. Once your employer has been notified, they are required by law to send a specified portion of each paycheck to the IRS. A portion of the paycheck that would have been paid to you will now be paid to the IRS. This paycheck garnishment remains in effect until your tax debt is paid off or until the IRS agrees to release the garnishment.
If you are self-employed, your are not safe from such a garnishment. The IRS revenue officers can send a wage levy to your clients and levy your accounts receivable. Those clients are required to send any funds they owe your business to the IRS to cover the delinquent tax debt. In addition, your reputation is tarnished with your clients, both because they know about your tax problems and they went through the uncomfortable experience of having to deal with IRS Revenue Officers.
4) Asset Seizures
If there is a tax lien against your property, it means IRS revenue officers are claiming the property as a back-up financial resource if you are not able to cover your tax debt. If IRS revenue officers decide the only way to collect a delinquent tax debt is through an asset seizure, they will issue a tax levy against your property. Once the tax levy has been issued against property, the taxpayer has 30 days to act before the asset seizure will be enacted..
Once the 30 days has passed, you will receive no further notice from the IRS before your assets are seized . The IRS has the power to seize and sell your property and assets in order to cover your tax debt. In general, they will not seize a primary residence. Asset seizure does not only mean hard assets, but soft assets as well. Hard assets include property houses, boats and cars, but the IRS also can seize soft property in the form of retirement accounts, rental income, commissions and the cash value of your life insurance policy. To avoid asset seizures by IRS revenue officers, you need to take action once the string of actions by the IRS revenue officers begin.
If you have been contacted by IRS revenues officers or you have been alerted to collection actions by IRS revenue officers, please get in touch with the Tax Resolution Institute to access the help that you need. Call us at 800.401.5926 for a free consultation or fill out our contact form.