What Are My Rights as a Taxpayer When Dealing With Liens and Levies?

Facing an IRS lien or levy can be stressful, especially when your property, wages, or bank accounts are at risk. A tax lien can make it difficult to sell your home or secure a loan, while a levy allows the IRS to seize your assets outright. If you’ve received a notice from the IRS, it’s important to know that you have rights and legal options.

The IRS must follow strict procedures before enforcing collection actions, and you have the ability to challenge, negotiate, or resolve your tax debt before losing your property. Understanding these protections can help you take action and regain control of your financial situation.

Your Rights as a Taxpayer When Dealing With IRS Liens and Levies

1. The Right to Be Informed

The IRS must notify you before filing a lien or issuing a levy. This means:

• For a lien, the IRS sends a Notice of Federal Tax Lien (Letter 3172) after filing it with local authorities.
• For a levy, the IRS sends a Final Notice of Intent to Levy (Letter 1058 or LT11) at least 30 days before seizing your assets.

If you receive one of these notices, don’t ignore it—this is your opportunity to respond, dispute, or negotiate a resolution.

2. The Right to Appeal

You have the right to challenge a lien or levy through an IRS appeal process. There are two main options:

• Collection Due Process (CDP) Hearing: If you disagree with the IRS’s actions, you can request a CDP hearing within 30 days of receiving the notice. This allows you to present your case and possibly get the lien or levy removed.
• Collection Appeals Program (CAP): A faster option that lets you challenge a lien or levy before or after the IRS takes action. However, CAP decisions cannot be taken to court.

3. The Right to Pay Only What You Owe

Mistakes happen. If the IRS incorrectly assessed your tax debt, you can:

• Dispute the amount through an appeal.
• Request a correction if payments or credits weren’t applied properly.
• File for a refund or an abatement if you overpaid.

4. The Right to Set Up a Payment Plan

If you can’t pay your tax debt in full, the IRS offers several options to prevent liens and levies:

• Installment Agreement: Allows you to pay in monthly installments.
• Offer in Compromise (OIC): Lets you settle your tax debt for less than you owe if you qualify.
• Currently Not Collectible (CNC) Status: If you’re facing financial hardship, the IRS may pause collections temporarily.

Applying for one of these programs can stop a levy from happening and may even lead to the removal of a lien.

5. The Right to a Fair Collection Process

The IRS cannot seize all your assets. There are legal protections in place, such as:

• A portion of your wages is exempt from garnishment.
• The IRS cannot take essential items like basic clothing, household goods, and certain retirement benefits.
• You can request relief if a levy creates serious financial hardship.

6. The Right to Representation

You don’t have to face the IRS alone. You have the right to:

• Hire a tax professional (attorney, CPA, or enrolled agent) to negotiate on your behalf.
• Request that the IRS communicate directly with your representative instead of contacting you.

7. The Right to Know the Time Limits for Collection

The IRS can’t chase you forever. In most cases, they have 10 years from the date of assessment to collect your debt. If that time expires, the tax debt is no longer legally enforceable.

8. The Right to Take Your Case to Court

If the IRS denies your appeal, you can:

• Take your case to U.S. Tax Court, the U.S. District Court, or the Court of Federal Claims.
• Challenge the validity of a lien or levy in federal court.

Final Thoughts

Even when you are dealing with an IRS lien or levy, understanding your rights can give you the power to take action before losing your assets. The IRS must follow strict procedures when pursuing collection, and as a taxpayer, you have the right to be informed, dispute unfair assessments, and explore payment options that work for your financial situation.

Ignoring an IRS notice can make things worse, so if you receive one, act quickly—whether that means requesting an appeal, negotiating a payment plan, or seeking professional representation. By exercising your rights, you can prevent aggressive collection actions and find a solution that helps you move forward.

If you’re unsure about which course of action is best for your specific situation, consulting a tax professional or attorney can provide clarity and guidance. The IRS has significant power, but with the right approach, you can protect your assets and work toward resolving your tax debt on the best possible terms.