Robert G. Nath
Over 30 Years'
IRS and State Tax
Robert G. Nath, PLLC
1775 Wiehle Avenue
Reston, VA 20190
- What's the difference between a tax lien and a tax levy?
A lien is a legal charge on property. Examples include you home mortgage or the lien on you car if you bought the car "on time." A levy is the actual seizure of assets. So these two instruments are very different. A tax lien does not seize anything; it "encumbers" assets (by law, all your assets). A tax levy is the actual seizure.
- Can you go to court to stop the IRS from seizing assets?
Normally, no. That's been the law forever and has been enshrined in numerous Supreme Court cases. Federal law forbids any court from "enjoining" (issuing an injunction against) the assessment or collection of taxes. There are a few exceptions, again authorized by law, that arise in rare circumstances, for example, where the IRS acts in clear violation of some tax provisions. So your best chance of resolving many tax disputes is at the IRS level.
- Can an IRS levy take my Social Security benefits? My IRA? Retirement accounts?
Yes. Social security benefits are not exempt from IRS levy, even if other laws, such as state laws, protect them. The same is true of IRAs and other retirement accounts, so long as you have access to them. Some retirement assets are protected by time; that is, you have no "vested" right to certain benefits until you reach, say, retirement age. Those benefits can't be seized by the IRS, at least until you can get to them.
- What about inheritance? Is that subject to seizure?
Yes, if you have a vested legal right under a will; no if you do not. The general difference is that if you are named in a will, normally you have no legal right to anything. It's an expectancy; your father, mother, wife, husband, etc. can change it at any time before they die. You have no right. That situation changes when the person dies and you have a legally protected interest under a will.
- My wife and I own a home with $100,000 of equity. Only I owe taxes (about $70,000). Can the IRS seize and sell our home for my taxes, if we own the home as "tenants by the entirety?
Probably, though the law is still being developed in the courts on this point. Before 1983, the general rule in most states was that property owned "by the entireties" (husband and wife) could not be sold to pay the debts of only one of the two tenants. (This was originally a "widow's protection" statute.) In 1983 and 2002, the IRS won Supreme Court cases that, read together, may allow the IRS to do just that. The agency is reluctant to exercise this power. Even so, you still have to do something about that tax debt. You may be eligible for an offer in compromise (to pay a reduced amount - possibly only a fraction of what you owe), or other payment arrangement, depending on your facts.