IRS Liens, Levies & Collections Procedures
Liens: Claims Against Property for Tax Debt
A lien is a claim on a taxpayer’s property to satisfy unpaid taxes. Under federal law, the IRS automatically places a lien on a taxpayer’s property if the tax debt is not paid within 10 days of notification.
- The Notice of Federal Tax Lien publicly informs creditors that the IRS has a claim against all of the taxpayer’s property.
- Lien notices are typically filed in counties where the taxpayer resides or owns property.
Levies: Seizure of Property for Tax Debt
A levy allows the IRS to seize and sell property to satisfy unpaid tax liabilities, including:
- Real estate, personal property, wages, and bank accounts.
- The IRS must provide 30 days’ notice before placing a levy.
- Banks must hold funds for 21 days before transferring money to the IRS.
Property Exempt From IRS Levy (IRC §6334)
Certain property is protected from IRS seizure, including:
- Necessary apparel and schoolbooks for the taxpayer or family.
- Personal household effects (up to $10,090 for 2022).
- 85% of wage replacement payments (unemployment, disability, pension).
- Public assistance payments and service-connected disability payments.
- Income required for court-ordered child support.
- Business or trade property (up to $5,050 for 2022) unless a district director determines other assets are insufficient.
- Primary residence (if total tax debt is $5,000 or less); court approval is required for home seizures.
- Undelivered mail.
Retirement Accounts & IRS Collection Actions
- The IRS considers retirement funds available to pay tax debt, including IRA, Keogh, SEP, and 401(k) accounts.
- 401(k) funds may be levied even if state laws classify them as creditor-protected.
- If the IRS levies a qualified plan or IRA, the 10% early withdrawal penalty does not apply.
- However, the penalty remains if the taxpayer withdraws funds voluntarily to avoid a levy.
Passport Revocation & Denial Under the FAST Act
Under the Fixing America’s Surface Transportation (FAST) Act), the IRS certifies tax debts over $55,000 (2022) to the Department of State, leading to passport denial or revocation.
- Taxpayers receive a CP508C Notice informing them of their seriously delinquent tax debt.
- The Department of State may revoke, deny, or restrict a taxpayer’s passport.
- Relief options include payment agreements or offers in compromise to resolve the debt.
Appeal Rights for IRS Liens, Levies & Seizures
Taxpayers will receive IRS Publication 1660 (Collection Appeal Rights) detailing appeal procedures. The two main appeal methods are:
- Collection Due Process (CDP)
- Requires Form 12153 to request a hearing.
- Available only if the IRS places a lien or levy on property.
- Decisions can be appealed in court.
- Collection Appeals Program (CAP)
- Requires Form 9423 to file an appeal request.
- Faster than CDP but binding—taxpayers cannot challenge the decision in court.
For more information, visit www.irs.gov.