They are a few notices more alarming than those from the IRS. And if you don't handle them, you and your finances could be in for a miserable time. You're probably well aware that tax debts are unlike any other types of debts, and that the IRS is considerably more powerful than any other collection agency, but do you know why?
Take a few moments to familiarize yourself with their more notorious methods, rather than flying blind. While there are a number of things that could happen if you have a tax debt, some IRS tactics can be especially troublesome. There are three in particular to be on the lookout for (and to avoid at all costs):
If you haven't dealt with a tax debt before, there's no reason why you should know what a tax lien is. Admittedly, many people often confused liens with levies (a separate issue which we'll cover in a moment). A federal tax lien secures the government's interest in your property in the event that you don't pay your back taxes. This lien applies to anything you own or anything you come into possession of for the life of the debt, including any assets, land and vehicles. When other creditors become aware that you have a lien placed against you, obtaining a loan or a new line of credit will be improbable. To make matters worse, you may not find out that you even have a lien until you attempt to make such a credit request.
If a lien is a vice grip on your finances, the levy occurs when the IRS squeezes. Otherwise known as a garnishment, a levy is a forfeiture of money as a result of an unpaid tax debt. A levy may be placed on your wages, resulting in a percentage of your income being taken and applied to your outstanding IRS balance. This can be trying, not simply because of the hit your finances take, but because your employer then becomes aware of your tax trouble. You may also be subject to a bank levy, which can result in funds being taken from your checking or savings account – up to the full amount that you owe.
Money isn't the only thing the IRS can take away from you. If you neglect your tax bill for long enough, the IRS can take your property. This includes your car, valuables…even your business. Seizures are notoriously difficult to contest, as this type of collection action typically follows prolonged inattention to notices and requests from the IRS. Seizures constitute an exhaustive, final effort to satisfy your back taxes.
The good news is that many IRS collection actions can be halted, provided you take the proper action. A wage garnishment, for instance, can be lifted if an agreement can be made with the IRS. This type of resolution is often best handled by a licensed tax professional. In many cases, you can be set up on an installment agreement to pay your tax debt over time. A tax resolution organization can establish such an agreement for you and ensure that you don't pay more than you're comfortably able to. No matter what stage of IRS action you're currently facing, you may want to request a free consultation with a licensed tax company. By securing a professional resolution, you can avoid continued correspondence from the IRS and prevent the big three from punching holes in your finances.