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What are a taxpayer's procedural rights against an IRS tax lien?

If you receive correspondence from the Internal Revenue Service about an alleged tax deficiency, it is important to understand your options. There are certain procedural protections afforded to a taxpayer, and an attorney that focuses on tax law can help individuals communicate with the IRS along each step of the way.

First, don’t be scared by the prospect of an IRS levy or tax lien. There are several procedural steps that must precede these collection activities. In the case of a levy, there are usually five letters that the IRS must send after the taxpayer has filed his or her tax return. If a taxpayer has not responded after the fifth letter, the IRS may be able to levy against the taxpayer’s wages and/or bank accounts. Similarly, the IRS typically sends five letters, comprising notice and demand for payment of the alleged tax debt, before formally filing a Notice of Federal Tax lien.

If the tax debt is undisputed but the taxpayer can’t afford to make payment in full, the IRS may be open to alternatives such as an installment agreement or an Offer in Compromise. The former involves payment in full over a period of time, whereas an OIC is an arrangement between the IRS and the taxpayer for settlement of the tax debt for a smaller amount. Typically, a taxpayer must demonstrate financial hardship before the IRS agrees to an OIC.

If a taxpayer disputes the tax, one option is to request a Collection Due Process hearing. This request can be made after a taxpayer has received a correspondence outlining the right to request a CDP hearing. For example, a taxpayer may have received a Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320 letter from the IRS.

Source: Huffington Post, “IRS Collection Activity and Levies Can Be Avoided,” Jan. 23, 2014

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