The IRS can seize assets in exchange for unpaid state taxes, including property and wages. A state tax lien can be detrimental to a taxpayer’s financial situation and can result in wage garnishment or property seizure. Taxpayers have options to avoid a state tax lien, including appealing the fee, setting up a payment plan, or filing for bankruptcy.
In the United States, a state tax levy occurs when the IRS seizes a taxpayer’s assets in exchange for unpaid state taxes. This is essentially a legal effort by the IRS to get money owed to you, and it can come in the form of a property garnishment or wage garnishment. The IRS takes these steps only after initially contacting the taxpayer in question about money owed and then issuing a final notice. After that, the state tax collection process begins and continues until the taxpayer advances the required amount or enough is collected from the taxpayer’s assets to satisfy the debt.
Unpaid taxes can create serious financial problems for an individual. When the amount of unpaid taxes is severe or the time they were supposed to be paid has passed, the IRS can use various methods to collect this debt. The IRS may consider a lien on a taxpayer’s property to secure the debt. In serious cases of unpaid state taxes, a state tax lien can be the last resort and be exceptionally detrimental to the taxpayer’s financial situation.
At the time all avenues for contacting and advising the delinquent taxpayer to pay the state taxes owed have been exhausted, a state tax lien will be made. Once the IRS makes this decision, it has the ability to collect any part of the income earned or withheld by the taxpayer. This can come through wage garnishment, existing bank accounts, or state tax refunds.
A state tax lien may also include the seizure of any property owned by the taxpayer. The IRS may also contact the taxpayer’s employer or bank to notify them of the settlement and the fact that any funds in the taxpayer’s possession are now owed to the IRS until the debt is paid off. In addition, a lien will also appear on the taxpayer’s credit report, further damaging their ability to climb out of the financial hole.
Since a state tax lien is so severe, taxpayers should be aware of the options available to them to avoid this situation. First, they have the right to appeal the fee and question its legality. If they recognize that they owe the state taxes in question, they can structure a payment plan with the IRS that works for both parties. Filing for bankruptcy is another option, which, while drastic, may be the only way for the taxpayer to find their financial footing again.
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