This sounds like a list of horrible things that can creep up on you in the middle of the night! In fact, all these things are ways the IRS, States and other collection agencies seize assets and property from taxpayers!
What these words mean in real life depends on how each collection agency uses these terms.
Internal Revenue Service Levy
The IRS usually only uses the term Levy in reference to Bank Levies. This is when the IRS sends a letter directly to a taxpayer’s bank that orders the bank to freeze the taxpayer’s assets at the bank. This includes what is in a deposit box too.
The bank then must notify the taxpayer of the levy and the taxpayer has 21 days from the date their bank received the letter to try to get the IRS to release some or all the seized assets. After 21 days pass, any unreleased funds are then sent to the IRS. It is exceedingly difficult to get any funds returned from the IRS once the funds are sent to the IRS.
The IRS issues Wage Garnishments to force an employer or income source to send a portion of the taxpayer’s income to the IRS. Normal wage garnishments can be as high as 50% of someone’s net wages. The IRS can take up to 15% of someone’s Social Security or more if there is additional income. 1099 and self-employment sources of income can be hit with garnishments as well. Wage Garnishments can be released by negotiating with the IRS.
Tax Liens are general notices to the public that can attach to real property. They do show up on credit reports and are filed with the local county recorder of the taxpayer – or where the IRS believes the taxpayer owns property. To buy/sell or refinance property the Tax Lien needs to be addressed in some way. There are a variety of ways a Tax Lien can be resolved.
As there are 50 different states the phrases used for the same or similar collections vary greatly. A State Levy can attach to wages, a Sheriff’s Warrant can attach to a bank account or property.
States can take all the same actions that the IRS can but they are often called different things so they can be confusing. States do Sheriff’s to someone residence to serve Tax Warrant’s which can be very scary.
Other Agencies / Private Collections
To add to the fun many states and the IRS will use outside collections such as private collection agencies, Attorney offices and/or their Attorney Generals to collect taxes owed. They can all use different terms and practices when collecting from taxpayers.
How Do I Know What If A Letter Or Call Is A Scam? What To Do When I Get Tax Letters!
The best thing to do is to call GUARDIAN TAX LAW, PLLC. We review tax letters for free as we see them all the time. We can tell very quickly if it is a scam, a company trying to scare up business with threatening letters, or something serious that needs to be addressed right away.
Often the letters are not much to worry about but sometimes they can be.
At the end of April 2023, I had someone call in as they had two people come to his door and give him what looked like tax letters. We had him send us copies for review and it turned out he was being summoned to appear before a Grand Jury in Federal Court to face possible criminal charges. We steered him in the right direction but that is a very rare, but very serious letter.