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Will an administrative hearing halt IRS collection efforts?

In our last post, we discussed the procedural requirements that the Internal Revenue Service follows before filing a Notice of Federal Tax Lien. Although a federal tax lien against one’s property may seem like a drastic action, it is important to understand that there are other, sometimes more immediate actions the IRS may employ in its collection efforts. 

For example, a levy, or seizure of property, may actually be more serious than a lien. Pursuant to the federal tax code, the IRS is authorized to seize and sell wages, real estate, funds in bank accounts and personal property to satisfy a delinquent tax debt. A federal tax lien filing, in contrast, serves as public notice to other creditors that an individual’s real estate is encumbered. It does not necessarily mean that the property is in danger of imminent seizure and sale. 

Typically, the IRS must issue a Final Notice of Intent to Levy and Notice of Your Right to a Hearing a minimum of 30 days before seizing property encumbered by a tax lien. The good news is that a taxpayer in this situation still has rights, as suggested in the title of the IRS correspondence. By requesting a Collection Due Process hearing, any IRS collection efforts that are underway must halt. A hearing will generally be scheduled within 90 days of the taxpayer’s request. 

Although a CDP hearing request may buy a few months of extra time, it would be a mistake to go into this administrative forum unprepared. With the help of a tax attorney, an individual can explore various strategies, such as an offer-in-compromise or an installment arrangement.

Source: Accounting Web, “What Your Clients Should Know About Federal Tax Liens,” Craig W. Smalley, Feb. 11, 2016 

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