With the IRS announcing they will be resuming pre-Covid collection levels this month, it is essential to know the different options available to the IRS to forcibly collect on an outstanding tax liability.

If you are a taxpayer who has accrued a tax debt within the past two years, the IRS will give you some breathing room before taking aggressive collection actions like the ones mentioned in this article. The regular computer-generated collection notices will begin to be sent via U.S. Mail, with each escalating the attention-getting verbiage used. The notices begin with “kinder, gentler” wording: “Hey there, taxpayer, you may not have realized this, but you owe us money… please pay the balance due by the end of the month.” Slowly but surely, these notices escalate to “We’ve told you about the debt, we’ve been sending you notices that you continue to ignore, so now the hammer is coming down.”

If you are a taxpayer with a tax liability predating Covid, you will likely face more immediate collections if you have yet to work with the IRS to resolve your debt. A refresher notice will be issued on all debts owed, but after the deadline expires, the IRS will resort straight to “the hammer.” Whichever situation applies to you, the most important thing to remember is that if you receive an Amount Due notice, do NOT ignore it.

There are several ways the IRS can collect on a tax debt; the following outlines the most commonly employed tactics used by the IRS to recoup the monies owed:

Tax Return Refunds!

This is, across the board, one of the “no-brainer” actions the IRS takes when a taxpayer owes a balance. The IRS can and will seize any tax refunds due to the taxpayer by the IRS or the State(s) when an overpaid tax return is filed. This occurs for every taxpayer, no matter if they are cooperating to resolve the tax debt, not cooperating in resolving their tax debt, or are on a resolution. The only exemption is if you have satisfied the terms of an approved Offer in Compromise.

Levies!

This is the most common way the IRS will collect on a tax debt, but did you know there are several different types of levies? They are as follows:

• Bank Levy – This is the most common levy issued against taxpayers. When a bank receives a levy notice from the IRS, action is taken at the moment the levy is processed. The bank will withdraw funds from all accounts associated with the taxpayer to hold for 21 days. This timeframe is granted so the taxpayer has the opportunity to try to negotiate a solution with the IRS and seek the monies to be released from the levy and put back into the taxpayer’s bank account. If the levy is not released, the bank is legally obligated to send the funds to the IRS.
• Wage Levy or Wage Garnishment – This levy will be sent to a taxpayer’s employer, even if the taxpayer in question is an officer/owner of that business. If wages are issued, the IRS can go after them as a viable resource to collect on a past-due tax debt. The IRS does have a limitation on how much can be captured from each paycheck, which is dictated by the following factors:
  • Filing Status
  • Frequency of pay
  • Number of claimed dependents.
  • If the taxpayer is over 65 years of age.
  • If the taxpayer is blind.

Unlike bank levies, wage levies/garnishments remain in place until a release is issued by the IRS or the debt listed on the order is paid in full.

• Social Security Levy – Yes, you read that right. If the taxpayer receives Social Security benefits, this too can be levied through the Federal Payment Levy Program. If this is the taxpayer’s sole source of income, a levy can drastically reduce their monthly income, causing severe financial hardship.
• Retirement Levy – If the taxpayer has retired and receives monthly payments from retirement accounts, the IRS can levy those payments too.
• Account Receivables Levy – This one applies only to business taxpayers. The IRS can issue levies to any client or customer of a business for past-due taxes owed. What makes this a serious issue is that not only does the taxpayer lose the income owed to the business, but it could also cause the business to lose the clients or customers who have received the levy. This could also hurt the business’s reputation, hindering future customer potential.

Seizure!

Seizures can be one of the most terrifying forms of collection action the IRS takes. While a levy is a type of seizure, it refers to a liquid asset. The types of seizures referred to are physical asset seizures. Typically, by this point, the taxpayer has not cooperated with the IRS to resolve your tax debt, levy actions were taken to “inspire” the taxpayer to address the debt, yet no progress has been made to resolve the past-due taxes owed. The IRS then determines that the only way to collect the debt owed is to take even bigger and badder actions. The IRS then proceeds with seizing the following types of assets of the taxpayer:

• Vehicles
• Boats
• Real Estate
• Assets not covered under the exemption rule.

The thought of the IRS even threatening collections, let alone experiencing it first-hand, can be upsetting and extremely stressful. It can turn a taxpayer’s world upside down in the blink of an eye. Golden Lion Tax Solutions cannot stress enough the importance of staying ahead of a tax debt owed to the IRS (or State!). If you or one of your clients has a tax debt that needs to be addressed, the Golden Lion Tax Solutions team is experienced with handling collection action threats and knows how to identify and negotiate the best resolution available to the taxpayer based on their unique situation.

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Trust. Protection. Wisdom.

Your future and your family deserve the right protection. Golden Lion Tax Solutions will be your advisor and confidant throughout the entire journey. We guarantee to offer you or your business best-case solutions for your tax debt. We are by your side every step of the way. Start now and get your life back.

For help with your tax debts, email contactus@goldenliontaxsolutions.com or call 833-LION-TAX (833-546-6829)

Disclaimer: There are requirements that must be satisfied in order to qualify for some of the tax solutions we discuss on our website. Not all of our services will be suitable for every client. Golden Lion Tax Solutions is here to help you find the most appropriate solution to fit your situation.