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The IRS doesn’t require a court order to pursue an unpaid tax debt. Internal Revenue Code Sections 6321, 6331, and 6334 allow the agency to place a lien on all your property and garnish your wages until they are paid off. For the majority of taxpayers, these two collection mechanisms—the federal tax lien and the wage levy (garnishment)—are when a tax issue becomes real.

The role of the tax attorney is to break that cycle, find a solution the IRS will agree to, and get the lien or levy lifted as soon as possible per the rules. In this guide, you will learn about how that process really works in simple terms.

An IRS wage garnishment (also referred to as a “continuous levy” in IRC Section 6331(e)) is a formal directive to withhold a significant portion of your paycheck and remit it directly to the IRS. A wage levy, unlike a bank levy that takes a one-time snapshot of your account, continues to deduct funds from each paycheck until it’s released.

The IRS will first send a series of notices, culminating in a Final Notice of Intent to Levy (Letter 1058 or LT11), which notifies the taxpayer of 30 days to pay, contact the IRS to discuss payment, or to request a Collection Due Process (CDP) hearing (Form 12153).

The IRS uses its formula as opposed to the cap with private creditors of about 25% of disposable income under the Consumer Credit Protection Act. It takes everything over what it considers a “modest exempt amount” based on filing status, pay frequency, and number of dependents, as found in IRS Publication 1494.

Table 1.1 Paycheck for different cases

The IRS assumes the exemption amount for Single, zero dependents, whichever is the lowest, if an employee does not return the Statement of Exemptions and Filing Status within 3 business days of receiving the IRS paperwork for the levy.

When the IRS assesses the tax liability, provides the taxpayer with a bill, and the taxpayer doesn’t pay, the IRS becomes a creditor of the taxpayer by filing a federal tax lien under IRC Section 6321. The lien is attached to the property, including real estate, vehicles, bank accounts, and future assets obtained during the period of the lien.

A public Notice of Federal Tax Lien (NFTL) is generally issued to the county recorders by the IRS as soon as a balance reaches a certain limit. This filing hurts credit applications, makes refinancing more difficult, and appears in property and business records. The IRS’s own advice is that a lien attaches to all of your assets, future assets you acquire while the lien is in effect, and even your business property and accounts receivable.

Table 1.2 Lien vs Levy Difference

The typical approach of a tax attorney is first to halt the bleeding, establish the debt, and then negotiate a permanent solution.

1. Filing a Power of Attorney and Making Direct Contact

The attorney files Form 2848 to authorize them to act as the taxpayer’s representative and prevents the IRS from contacting the taxpayer directly, while providing a direct link to the assigned Revenue Officer or Automated Collection System (ACS).

2. Requesting a Collection Due Process Hearing

When a CDP hearing may be the best way to delay enforcement of a levy before it begins, it can be done by filing a hearing request, Form 12153, which is often the cleanest approach if the 30-day period following the Final Notice has not expired. Maintains appeal rights and gives the IRS other options to consider before they act.

3. Verifying the Underlying Debt

Attorneys request IRS transcripts to verify the balance, assessment dates, and the Collection Statute Expiration Date (CSED), which is the IRS’s 10-year time period to collect. Sometimes some of the debt is already uncollectible or was due to an inaccurate substitute return.

4. Choosing a Resolution Path

After the numbers are verified, the attorney will match the taxpayer to the program that best fits — this is where the lien or levy is released.

Table 1.3 Understanding Resolution Path

5. Requesting Lien Withdrawal, Discharge, or Subordination

A withdrawal (Form 12277) completely withdraws the public filing from the mix, the best one for credit and refinancing purposes. A release is merely a notation that the debt is resolved as soon as it is paid, and the public record entry doesn’t change.

A discharge releases one piece of property (usually applies to the sale of a residence), and a subordination permits another creditor to take priority over the IRS without eliminating the IRS lien.

The Fresh Start Initiative by the IRS revised the amount of tax owed to file a lien from $5,000 to $10,000, and taxpayers with an outstanding debt of $25,000 or less can ask to have the lien withdrawn after signing a Direct Debit Installment Agreement and three consecutive on-time payments.

6. Monitoring Compliance to Prevent Re-Filing

Any resolution becomes a failure if the taxpayer does not file in the future or does not pay future taxes. The attorneys will likely include such continuing compliance monitoring as quarterly estimated payments, timely filings, etc., to maintain an installment agreement or CNC status.

Certain income categories carry statutory protection regardless of the Publication 1494 tables:

Table 1.4 Levy Treatment Based on Income Type

The biggest mistake taxpayers make is that they miss the 30-day window on the Final Notice of Intent to Levy. Failure to make that deadline doesn’t end collection — just eliminates the most efficient, low-cost means of stopping it.

Attorneys who are involved in the resolution prior to the levy on payroll can often negotiate a resolution. Still, when a garnishment is pending, it becomes a matter of expedited release while the underlying resolution is accomplished.

IRS wage garnishments and federal tax liens are automatic and powerful tools for collection, but they aren’t permanent. A tax lawyer’s worth is that he or she will work within the limited and narrow procedures the IRS allows, determine what the taxpayer is actually entitled to, and guide the case to the proper relief program, such as an installment agreement, an Offer in Compromise, being granted CNC status, or having the IRS lien withdrawn, to suit the taxpayer’s actual financial circumstances. The most important element in getting the problem solved quickly and cheaply is acting early, which should occur within days of the Final Notice.

The IRS issues a wage garnishment for unpaid taxes after the IRS issues a Final Notice of Intent to Levy and the taxpayer fails to respond within 30 days. There is no court order required — as soon as the window opens, the IRS will contact the employer directly and start withholding.

Yes. The quickest way to stop enforcement is to submit a Collection Due Process hearing request within the 30-day notice period using Form 12153. If an installment agreement is established or hardship is proven prior to the deadline, then the levy never hits payroll.

The amount of money that is protected is determined by tables in Publication 1494 from the IRS based on filing status, pay frequency, and number of dependents. All income above that level is withheld — typically 50-70% of net pay, because the IRS doesn’t have the same cap as private creditors do.

Yes. IRC Section 6321 provides that a lien is not just against property acquired before the filing of the lien, but extends to any property that is acquired after the lien is filed, for the period of its validity and the unexpired period of unapplication.

Not in the sense of erasing history, but rather, not automatically. When the debt is paid, a lien release is filed, which is a statement that the debt is paid, but the debt document remains on file. It must be completely removed via a separate withdrawal request (Form 12277).

The Federal Payment Levy Program is a levy of up to 15% on Social Security retirement, disability, and survivor benefits. SSI is 100% exempt. Unless protected, most private pensions and retirement distributions will continue to be subject to levy.

The levy doesn’t move over, but it’s not erased either. Once the IRS discovers the switch through the reporting of your income, they can put in a new levy on your new employer, and the debt remains outstanding.

The majority of levy releases occur 1-7 days after the IRS accepts an installment agreement, a Currently Not Collectible status, or an Offer in Compromise. Form 668-D is filed with the IRS by the employer, and the employer will end withholding.