What Your Clients Should Know About Federal Tax Liens

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Taxes can be assessed for different reasons. The most common reason tax is assessed is that a tax return has been filed and an amount is due. Other ways of assessing taxes are through notices of deficiency (NOD). An NOD can be issued after an examination, appeals, or something similar.

Once a tax has been assessed, the taxpayer is informed through a letter. If the taxpayer doesn’t pay the NOD, then he or she is put into the Automated Collections System (ACS). ACS will send more threatening letters, every 30 days. Eventually, a letter will come that is a Final Intent to Levy Notice, giving the taxpayer 30 days to appeal the amount being owed. If nothing is done, the IRS will then issue a tax lien against the taxpayer. The IRS files liens to protect the government’s interest on the amount of taxes being owed. Tax liens are filed with the clerk of the court, which is made public information. The lien will also go on the taxpayer’s credit report. With a tax lien, the IRS can start the collection of the tax that was owed.

What Happens Next?
The next step for the IRS in order to retrieve the debt owed is to do an asset search on the taxpayer. The IRS will try to locate the taxpayer’s bank accounts, employers, and other assets that the agency can levy in order to cover the taxpayer’s debt. The IRS can place a lien on the property that the taxpayer owns. For instance, it is common for the IRS to put a lien on a taxpayer’s home or automobile. If you’re familiar with watching movies, you would think that the IRS seizes property all of the time. However, the IRS isn’t an institution that seizes property, but the US Department of Justice (DOJ) is.

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About Craig W. Smalley, EA

Craig Smalley

Craig W. Smalley, MST, EA, has been in practice for almost 23 years. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.


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