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IRS Collections

  • A lien is a legal claim against your property (like real estate or accounts receivable) that secures the payment of a tax debt. It essentially puts other creditors on notice that the government has a claim to your assets, but it doesn't immediately take them.

  • A levy is the actual legal seizure of that property to satisfy the debt. It's the action that takes the asset. Think of a lien as a legal claim, and a levy as the act of taking.

Types of Levies on Businesses: If you don't respond or resolve the debt after these notices, a levy can be placed on various business assets, including:

  • Bank Levies: This is very common. The IRS or state agency can freeze funds in your business bank accounts. The bank will hold the funds for a certain period (e.g., 21 days for IRS levies) before remitting them to the tax authority.

  • Accounts Receivable Levies: Your clients or customers who owe you money may be instructed to pay the tax authority directly instead of your business. This can severely impact your cash flow.

  • Wage Garnishment (if you pay yourself a salary or have employees): While more common for individual taxpayers, if you, as the business owner, are also an employee of your own corporation, your wages can be garnished. If you have employees, the IRS can also levy their wages if they have unpaid tax debts.

  • Seizure of Physical Assets: This can include business inventory, equipment, vehicles, or even real estate owned by the business. These assets can be seized and sold to cover the tax debt.

  • Federal or State Payment Levies: If your business receives payments from federal or state government agencies (e.g., as a contractor), these payments can be levied.

  • Tax Refund Offsets: Any federal or state tax refunds your business is due can be seized and applied to your outstanding tax debt.