11 / 10 / 11

Garishment, Lien or Seizures- Which Happens the Most?

Can you guess what has become the drastic "collection method of choice" for the IRS in recent years? Is it garnishments, liens or seizures?

Just as a reminder - if you don't pay your taxes, the IRS has the right to use any (or all) of these methods to collect payment.

  • A Garnishment is a form of levy that is a legal seizure of your wages, salary or federal payments to satisfy a tax debt.
  • A lien is a claim on personal property used as security for the tax debt.
  • A seizure is a claiming of your personal property to satisfy the tax debt that may result in the property being sold at auction.

So do you have an idea which of these methods is the IRS' "weapon of choice"?

If you guess "garnishment"...you're absolutely right.

A garnishment is basically a levy on property that is yours but is held by someone else, such as wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions.

In 2006, the IRS reported

  • 3,742,276 levies (garnishments)
  • 629,813 liens
  • 590 seizures

In fact, the 2006 number of garnishments shows a 36% increase over the years 2005 and an 84% increase over 2004.

Tapping Into Your Paycheck - It's Easy Money for the IRS

Think about it.

A lien on your property can certainly make life hard on you by destroying your credit and making it virtually impossible to sell your house - but it doesn't necessarily get the IRS what they want...your money. A lien is a coercion tactic more so than a direct ploy to get what they're really after - your cold, hard cash.

A seizure of your property gives them just that - property...but not necessarily money. They still have to go through the trouble and the cost of selling your belongings in an auction to extract money out of your belongings.

They can seize the cash in your bank account, but not indefinitely. If you have $200 in the bank, that's all they get...

...That is, until they garnish your wages. The IRS realizes that the one way they can virtually guarantee to get their money is to place a form of levy on your future income - a garnishment.

This is a "safe bet" for the IRS, since they know that you will always need to earn money to survive in the future.

You may be able to go without a car, a house or even cash in your bank account for now...but you can't go long without a paycheck. You most likely aren't going to quit your job just so you can't be forced to pay the IRS back taxes. That would be "cutting off your nose to spite your face".

3 Steps Before Wage Garnishment Goes Into Effect

There are specific steps that the IRS must go through before a wage garnishment goes into place:

  • The IRS must assess your tax and notify you that there is a deficiency by sending you a "Notice and Demand for Payment".
  • You neglect or refuse to pay the tax.
  • The IRS sends you a "Final Notice of Intent to Levy and Notice of Your Right to A Hearing" (levy notice) at least 30 days before the levy. They may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested.
  • If you don't act during this time, you'll be headed straight into a potential financial disaster.

The IRS will leave you very little in your paycheck to survive, and there's a very good chance that it won't be enough to pay your bills.

You may not be able to pay your car payment, house payment, minimum credit card payments, or other important monthly commitments.

Once you receive your "Notice and Demand for Payment" or worse...the "Final Notice of Intent to Levy and Notice of Your Right to A Hearing" - it's time to take massive action.

If this happens to you, don't hesitate to call me at 337-231-5657 immediately. By acting quickly, we may be able to get the IRS to drop the levy proceedings and work on an equitable solution.

Remember, in the end, the IRS just wants their money. It makes more sense for them to come to a satisfactory installment agreement than to risk driving you into financial ruin through a garnishment.