How to stop IRS attachment

Guinguette Marais Poitevin

Tax debts are one of the most difficult debts to get rid of. Even bankruptcy cannot pay off all of your tax debts, and the tax authorities have more power than other creditors to seize assets.

One way this is happening is for the Internal Revenue Service (IRS) to use a tax levy to seize property. This can be done without going to court and winning a judgment against you. A bank or credit card company, on the other hand, would have to successfully bring proceedings against you and meet other requirements.

Find out when a tax collection can take place and how to stop an ongoing one.

What is a tax collection?

A tax collection is a process that the tax office and local authorities use to collect money you owe. Tax collections can collect money in a number of ways, including debiting your bank account or garnishing your wages. Some of the most common strategies are:

  • Bank garnishments: The IRS may require your bank to prevent withdrawals from your account for 21 days and then withdraw funds from your account. The bank will then need to refer the money you owe to the IRS.
  • Garnishment: Your employer has a duty to withhold part of your salary and send it to the IRS until your debts are paid.
  • Attachment of property: The IRS may seize your property (such as a house or a car), sell it, and use the proceeds of the sale for your tax liability.
  • Reduced Tax Refunds: The IRS can withhold money that you would otherwise receive through a refund. The IRS can seize state and municipal refunds, as well as federal refunds, so that the state sends funds to the IRS instead of you.
  • Other possibilities: Tax authorities can collect in surprising ways. If you don't have cash to pay off your debt, they can find other assets, such as your social security benefits or business assets.

Creditors tend to prefer attachment of bank accounts because cash is the simplest type of asset (from their point of view). Accessing your vehicles or other assets takes more effort.

As a government agency, the IRS has more power than other creditors so the IRS can effectively jump to the top of the line. If you owe money to multiple creditors (such as the IRS, a mortgage lender, and a credit card issuer), the IRS has a good chance of collecting the money.

What to Expect

If you owe money to the IRS or any other tax authority, garnishment is always an option. However, it is usually a last resort option: creditors should give you timely warning before any assets are attached. Ideally, you will find ways to prevent the attachment.

The IRS has a duty to notify you by mail of the taxes you owe, so be sure to open your mail. Keep your mailing address up to date and communicate with the IRS if you have financial problems.

If you receive a document entitled “Final Notice of Intent to Levy and Notice of Your Right to a Hearing”, a tax collection may be imminent. At this point, it is wise to contact the IRS and get things sorted out as soon as possible.

Sometimes the Notice of Intent arrives earlier. For example, it might be in the mail before a tax bill, leaving you wondering how you missed previous notifications. This is definitely something to be taken seriously, but as long as you pay fast (or reach an arrangement with the IRS) you should be able to avoid bigger problems.

How to cancel a tax collection

It is possible to have a tax waiver. You have the right to object and prevent tax collection. You can even request that the creditors return the attached assets to you retrospectively.

To file an appeal, contact the IRS immediately to arrange for your tax bill to be paid and to apply for tax clearance. When filing an objection, work with the IRS's independent appeals office, which is separate from the debt collection agency. If you need additional help, ask a CPA, Enrolled Agent (EA), or local tax attorney how to go about it.

Generally, the garnishments are lifted when you settle your tax liability. However, in some situations you can appeal and have the IRS clear a garnishment for other reasons. The IRS must overturn a foreclosure if:

  • You paid the amount you owe.
  • The collection period ended before foreclosure was released.
  • You can pay your taxes when the foreclosure is lifted.
  • You have an installment payment agreement and the terms do not allow foreclosure to proceed.
  • The value of the property is greater than your debt and clearing foreclosure would not stop the IRS from collecting the amount owed.

If the foreclosure would mean extreme financial hardship for you, the tax office can postpone the collection. However, as long as the debt persists, you will have to deal with it at some point.

Foreclosure vs. Lien

As an alternative to foreclosure, the tax office can also raise a lien on your property. A lien is different from a levy because a lien gives creditors the opportunity to take and sell your assets at some point in the future. In a foreclosure, the creditor takes possession of your assets.

Liens give creditors an interest in your assets and help them secure future payment. For example, there could be a lien on your home that gives the IRS an interest in that asset. To establish a lien, the IRS files documents with local authorities to publicly document the interest.

A lien can create problems if you ever want to sell or refinance an asset because the tax liability has to be paid or settled before you have free and clear control over the asset. Lenders don't want to stand behind the IRS so they hesitate usually to approve a loan on a property with pending liens.

How you can prevent a tax garnishment

There are methods you can use to limit the chances of a tax garnishment being levied on your assets. If you can't prove the filing is unjustified, you may still be able to prevent a filing by using the following methods.

Payment in full

The best way to avoid problems is to pay all taxes you owe on time. But that is not always possible. If you're having trouble with your taxes, speak to the IRS and find out what your options are.

You can also work with a non-profit credit advisor or local lawyer for more information and advice.

Payment over time

You don't always have to pay your entire tax bill in April. If you run into trouble, it may be possible to set up a payment plan that allows you to pay taxes over a longer period of time.

While you still owe interest and penalties, formalizing an installment payment plan with the IRS will keep them from assuming that you simply decided not to pay.

Make an offer

You can also negotiate and try to pay your tax debt with the IRS. With a settlement offer, you can show that given your income, expenses, and wealth, you are unable to pay off your debts. If you are successful, the IRS will allow you to pay less than your full tax bill.