Understanding Common Tax Collection Issues

By: Larson Financial


"Not only can an understanding of common tax collection issues and the rules associated with them help you avoid costly mistakes, it could also help you to reduce your tax liability. Below you will find some information that provides you with a general sense of common tax collections issues. However, keep in mind it's always a good idea to consult a tax professional for advice on a specific circumstance.

One tax issue is liens. While you may be familiar with a lien that is placed against property, such as a mechanic's lien, also known as judgment liens, this is a little different. However, tax liens are similar to judgment liens in that they are imposed when you fail to pay a tax bill.

Basically, when you get your tax bill you have a due date. If you do not pay the taxes by the due date the government can impose a tax lien. After this time a tax lien attaches to a property, which means that, the home cannot be sold without the lien being paid. Additionally there is usually a steep interest rate applied to the liability so that you cannot simply choose not to pay your taxes for long periods of time.

Another issue is tax levies. Levies are distinctly different from a lien as it is a legal seizure of your property to pay a tax debt you owe. A lien is a claim used as security for the tax debt, while a levy actually takes the property. If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in, including a car, boat or house or even your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions.

A levy will generally only happen after the IRS takes three steps. First they'll assess the tax and send you a Notice and Demand for Payment. Next you have to neglect or refuse to pay the tax. Then finally the IRS will send you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before the levy.

A wage garnishment is another form of a levy. This is by far the most serious financial tax issue you can face. An IRS wage garnishment, also called an IRS wage levy, is one of the most aggressive IRS collection tactics initiated to secure payment of back taxes. If the IRS is garnishing your wages they most likely have already files a tax lien or levy, but found that those methods didn't give them the result they wanted in collecting your delinquent taxes.

Once the IRS initiates a wage garnishment, an Order to Withhold Notice is sent directly to your employer. Your employer is required by law to withhold a portion of each paycheck in accordance with the notice. Your employer may not refuse the wage garnishment.

If you are at any time faced with these or other tax issues you should seek tax advice from professionals. They are ultimately more familiar with the laws and can help you get back on track much quicker than if you try to face the IRS alone."

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Larson Financial is a family owned group serving individuals and businesses with tax debt in all 50 states as well as IRS tax issues. Their group of experienced professionals can help you out of tax trouble fast.

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