First, the IRS will start sending letters. People usually know that they
haven’t filed their tax returns and they’re waiting in fear
before anything happens. When they receive these letters, they often ignore
them. If they ignore them long enough, the IRS can do a couple of things.
If the person is employed, the IRS can start garnishing their wages. The
employer has sent a copy of the person’s W-2 to the IRS every year,
so the IRS knows how much they make, and they know their address. The
IRS will be able to reach them and know where they work, making it easy
for them to garnish their wages.
The IRS does not threaten, but they do start sending more aggressive letters
to the taxpayer. They can also file liens against the taxpayer. A lien
is a recorded document in the county where the taxpayer lives. It’s
like a mortgage, except it extends to everything: all of the property
the taxpayer owns.
Let’s say there’s a lien against you. If you run your own business
and one of your customers sees that there’s a lien, then that customer
has a problem because the customer is on notice that you owe the IRS money.
The IRS has claimed that money, and if the customer paid you, the IRS
can go after your customer for that money. A lien is a huge problem for
a business owner.
A tax lien can have a devastating effect on a business owner’s credit.
Also, by recording the lien, the IRS is giving constructive notice. This
is like announcing to the world, “There’s a lien against this
person.” If the IRS really wants to play hardball with a business
owner, they can go after the business owner’s customers and say,
“This recorded lien is effective notice on you, so instead of paying
business owner you need to pay us, the IRS.” California’s
FTB, EDD, and BOE can all do the same thing. It can be really ugly.
If you have any bank accounts, the IRS can garnish or seize them. They
can do this to your bank account, a portion of your bank account, and
any other property anywhere else. If you have a boat, they can seize the
boat. If you have a car, they can even seize your car. It’s unusual
for them to do this. It’s much easier for them to take money out
of your bank account or levy your wages. They’ll do that pretty readily.
In the most extreme cases, if you own real property (like a house) they’ll
seize that and sell it. Usually, those are the most egregious cases, but
it could happen. They might even seize and padlock your business. They’ll
auction off your assets. Yes, they can do all those things. If people
put off paying their taxes long enough, it will happen. This has never
happened to any of my clients, because once I’ve got involved I’ve
been able to stop that from happening.
If You Get Levied or Garnished, Would the IRS Take Everything? What Do
They Leave You With?
If the IRS is garnishing your wages, they don’t have to leave you
much. They add up you “personal exemptions” and “standard
deduction” and divide the total by 52. The result is how much they
are required to leave you each week. They can take the rest under the law.
When you file a tax return, you’re allowed a certain number of exemptions,
one for you, one for each of your dependents. There’s a dollar amount
corresponding to each exemption. For 2015, it’s $4,000. Also, if
you file your federal income tax return and you don’t itemize your
deductions, you are entitled to a standard deduction. In 2015, the standard
deduction is $12,500 for a married couple filing jointly.
For more information on
Measures Taken by the IRS, a free initial consultation is your next best step. Get the information
and legal answers you need by calling
(510) 444-4430 today.