Federal Tax Lien Guide

What’s the difference between a levy and a lien?

A lien is a legal claim against your property to secure payment of your tax debt. A levy is the actual legal seizure of your property to satisfy a tax debt.

What happens when I owe back taxes? Can I just ignore the IRS?

You can ignore the IRS if you have no income, no assets, no interest in any property, no chance of ever coming into money or property, nor do you have any worries about criminal charges, however unlikely.

Once a tax debt is assessed the IRS will begin sending you their “notice stream” of collections letters. They include: 

  • CP501 – You have a balance due on one of your tax accounts
  • CP503 – The IRS has not heard from you and you still have an unpaid balance on one of your tax accounts
  • CP504 – You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will levy your state income tax refund and apply it to pay the amount you owe. At this point, the IRS can intercept your state refunds. 
  • CP90 – Final Notice of Intent to Levy and Notice of Your right to a Hearing (sometimes this will be sent as an LT11)

I started receiving collections letters from the IRS. What should I do?

More importantly – what shouldn’t you do? You shouldn’t put the letters away in a dark corner and hope nothing further will happen. If you are receiving these letters, it means you owe the IRS back taxes. If the bill remains unpaid, the IRS will take action and can levy your bank accounts and/or garnish your wages.  

I received IRS notice CP90 or LT11 (Final Notice of Intent to Levy and Notice of Your right to a Hearing). What does this mean?

This is the last notification you will receive before the IRS takes action on collecting the taxes due. You should take advantage of the 30 days in which to claim a Collection Due Process hearing. If you do nothing, the IRS will contact your employer to implement an IRS wage garnishment levy, and they are required by law to withhold money from your paycheck and send it to the IRS to pay your back taxes. In addition, they can take hold of the lump sums of money in your bank accounts.

What happens at a Collection Due Process hearing (CDP)?

At this hearing you have an opportunity to dispute the ability to pay the debt, and/or dispute the validity of the debt. You can present something called a “proposed collection alternative,” or raise issues why you don’t owe the tax, that is, claim innocent spouse relief, or an audit reconsideration.

I got a letter from my bank telling me my account was just frozen by the IRS. Is there help?

Yes. Money can be unfrozen if you act quickly and give reasons why the IRS should give it back, like you actually don't owe it, it is not your money, it is causing a hardship, or possibly the IRS made a mistake.

My wages are levied and the IRS is not giving me enough to live on. What should I do?

Request it be released. You may need someone to help you with this. It is important to have a strategy for your repayment plan. You want to be successful and ensure your repayment is substantially less than the IRS is levying from your pay.

I received income from a 1099. The IRS sent levies to my customers and other people that have paid me in the past. What should I do?

The law on 1099 levies is that the levy only attaches to what is due and payable at that time the levy is issued. The important thing to know is that you can get the levy removed. And, if funds are mistakenly sent to the IRS, you can get them back if you act quickly enough. 

Will the IRS seize my house or business?

The IRS may. But since 1998, this is really a last ditch effort. It is a tremendous amount of work for a Revenue Officer do a seizure. They will really only do it if you give them no other option…so give them another option. 

The lien the IRS filed is hurting me. What should I do?

Watch this video:


Can I have someone represent me at my Collection Due Process hearing?

Absolutely. You can have a tax attorney or other tax professional represent you at the hearing. At this point you’ll be dealing with an IRS appeals officer; they are some of the best and brightest at the IRS, and are very familiar with the incredibly detailed Internal Revenue Manual. Also, if you cannot find a reasonable solution at the hearing you have the right to take the case to tax court. You need to make sure you have very detailed records of what transpires at the hearing to be successful in tax court. 

I received the Final Notice of Intent to Levy or Notice of a Federal Tax Lien and missed the 30 day deadline. Now what?

If you miss the 30-day deadline to file a Collection Due Process hearing, you have a year from the date of the Final Notice of Intent to Levy to file something called an “Equivalency Hearing.” An Equivalency Hearing is just like a Collection Due Process hearing, with one major difference. There is no right to tax court. If an Equivalency Hearing is requested, typically the IRS will not levy or garnish, but are allowed to do so.

What if I miss the 1-year deadline to file an Equivalence hearing?

You may still request a levy to be released provided it is creating a hardship or by submitting a collection alternative such as an Offer in Compromise, an Installment Agreement or Request for hardship status. You may also be able to file bankruptcy to wipe out old tax debts, despite what some tax resolution companies claim.