IRS Tax Liens and Levies: Understanding Your Rights

IRS Tax Liens and Levies: Understand Your Options An IRS collection notice can leave you worried about your paycheck, bank account, or home. Understanding what the notice means—and which options apply to your situation—is the first step toward addressing it. SE Battaglia Tax Relief provides tax relief services to individuals and businesses in Connecticut and New York, helping them evaluate federal IRS tax problems and pursue appropriate resolutions. Depending on your circumstances, options may include an installment agreement, an Offer in Compromise, or temporary collection relief due to financial hardship. Eligibility depends on your tax compliance, financial circumstances, and other requirements. Explore IRS payment and relief options. What Is an IRS Tax Lien? A federal tax lien is the government’s legal claim against your property to secure an unpaid tax debt. It generally arises after the IRS assesses the tax, sends a demand for payment, and the balance remains unpaid. The lien can attach to property and rights to property you currently own, as well as property acquired while the lien remains in effect. A lien does not itself take your property. The IRS may also file a Notice of Federal Tax Lien, a public document that alerts creditors to its claim. The lien and the public notice are related but distinct. IRS explanation of federal tax liens. Can I Sell or Refinance Property With an IRS Tax Lien? A federal tax lien can complicate a sale or refinancing, but it does not necessarily prevent the transaction. Depending on the circumstances, the IRS may discharge a particular property from the lien or subordinate its interest to another creditor. Whether proceeds must be paid to the IRS—and how much—depends on the property’s value, other creditors’ priority, and the applicable requirements. You do not necessarily have to pay the entire tax debt to obtain a discharge of a particular property through the IRS tax lien removal process. If you are planning a transaction, address the lien early so the appropriate documents and IRS review can be coordinated with your lender or closing professional. What Options Are Available for an IRS Tax Lien? The appropriate remedy depends on what you need to accomplish: Release: Ends the lien. Discharge: Removes the lien from a specific property. Subordination: Allows another creditor to take priority over the IRS for the affected property. Withdrawal: Removes the public Notice of Federal Tax Lien; it does not itself eliminate the underlying tax debt. Certain taxpayers with qualifying direct-debit installment agreements may be eligible to request withdrawal, but a payment plan does not automatically qualify you. IRS lien-relief guidance. Federal law generally requires a certificate of release within 30 days after the IRS determines that the liability has been fully satisfied or has become legally unenforceable. An accepted settlement does not necessarily trigger an immediate release; its payment and other applicable requirements must be considered. IRC §6325. What Is an IRS Tax Levy? A levy is the actual taking of property or rights to property to collect a tax debt. The IRS may levy bank accounts, wages, and other income, or seize and sell certain assets. A publicly filed Notice of Federal Tax Lien is not a prerequisite for every levy. The IRS must satisfy the applicable collection requirements. IRS explanation of levies. Bank Levies When a bank receives an IRS levy, it generally holds the affected funds for 21 days before sending them to the IRS. This holding period provides an opportunity to address errors or request a release when grounds exist. Contact the IRS promptly if your funds have been frozen. IRS bank-levy guidance. Wage Levies An IRS wage levy generally continues until it is released, the debt is paid, or the collection period ends. Part of your wages is exempt under federal rules. The exempt amount depends on factors including your filing status and dependents; it is not simply whatever amount you normally spend each month. IRS wage-levy guidance. What Notice Must the IRS Provide Before a Levy? Generally, the IRS must: Assess the tax and send a Notice and Demand for Payment. Have an unpaid balance after that demand. Provide a Final Notice of Intent to Levy and notice of your right to a hearing at least 30 days before the levy. Exceptions apply, including certain state-refund levies, jeopardy situations, and specified employment-tax or federal-contractor cases. Prior notices for the same tax period can also affect your rights. IRS levy requirements and exceptions. Read the exact notice and its deadline. Do not assume that every letter starts a new 30-day period or that a telephone call extends your deadline. Is Any Property or Income Protected From Levy? Federal law protects certain property and payments, subject to specific conditions and exceptions. Examples include necessary clothing and schoolbooks, certain household items and work tools within statutory limits, workers’ compensation, certain public-assistance payments, and a portion of wages. Dollar limits for some protections are adjusted periodically. Federal levy exemptions. Social Security benefits are not categorically exempt. Certain benefits may be subject to levy through the Federal Payment Levy Program. Protection depends on the benefit and collection rules involved. IRS Social Security levy guidance. If a levy leaves you unable to meet basic living expenses, you may have grounds to request a release even when the affected property is not otherwise exempt. What If a Levy Is Causing Financial Hardship? For an individual taxpayer, the IRS must release a levy when it determines that the levy creates economic hardship by preventing payment of reasonable basic living expenses. The IRS may request information about your income, expenses, and assets to evaluate the situation. Explain what you cannot pay—such as housing, food, utilities, or necessary medical expenses—and be prepared to provide supporting records. A hardship release addresses the levy. It does not erase the remaining tax debt, which may still require a payment arrangement or another resolution. IRS hardship-release guidance. How Can I Respond to or Appeal an IRS Levy? If you receive an LT11 or Letter 1058, review the deadline for requesting a Collection Due Process hearing. A timely request generally suspends the levy action covered by the hearing while the administrative proceeding and any applicable judicial review are pending, subject to exceptions. Form 12153 is used to request the hearing. IRS LT11 and Letter 1058 guidance. Other appeal options may be available depending on the notice, collection action, and timing. If a deadline has passed, obtain a review promptly rather than assuming that all options are lost. The IRS must release a levy when applicable legal conditions are met, including when: The liability is satisfied or becomes legally unenforceable. Releasing the levy will facilitate collection. An installment agreement is entered into unless its terms provide otherwise. The levy creates qualifying economic hardship for an individual. The property’s value exceeds the liability and a partial release will not hinder collection. An improperly issued levy may also warrant corrective action. Whether money already sent to the IRS can be returned requires a separate review. IRS levy-release guidance, IRC §6343. How SE Battaglia Tax Relief Can Help Stephanie Battaglia, Enrolled Agent, offers valuable tax relief services to clients, helping them understand IRS collection notices, review account information and financial records, and pursue appropriate administrative resolutions. Depending on your needs, assistance may include: Reviewing a lien or levy and the available response options. Preparing financial information to support a hardship or payment-plan request. Requesting an appropriate lien remedy or levy release. Evaluating an Offer in Compromise or another resolution. Representing you in IRS collection matters and administrative appeals. The appropriate approach depends on your circumstances. Hiring a representative or requesting a consultation does not, by itself, stop IRS collection. Request a Zoom Consultation SE Battaglia Tax Relief serves individuals and businesses in Connecticut and New York from a remote practice based in Hamden, Connecticut. Consultations take place via Zoom, and cases are managed online as much as possible. Request a Zoom consultation to discuss your IRS tax issue and the next steps. If your bank account is frozen, your wages are being levied, or a notice deadline is approaching, contact the IRS using the number on your notice promptly. Do not wait for a consultation before addressing an urgent deadline.