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The Tax Levy guide includes all the following resources:
- Five Reasons The IRS May Consider For Returning Levied Property
- FIVE Reasons The IRS May Release Property
- Six Reasons The IRS Must Release a Levy
- Request for Due Process Hearing
- Claim for Reimbursement of Bank Charges Incurred Due to Erroneous Service Levy or Misplaced Payment Check
- Thirteen Types of Property that the IRS CANNOT LEVY OR SEIZE
- Collection Appeal Rights
What is a tax levy?
When the IRS or a State has failed to collect back taxes, they will begin to seize assets. If phone calls and letters are not returned, they will take the next step. This process is called a “levy”. Levies and wage garnishment can be the most stressful and humiliating of all collection tactics. They do this to force taxpayers into willful compliance. If the IRS files a Federal tax levy, the IRS can legally wipe out your bank account. The IRS does have the option to seize your personal property and convert it to cash to satisfy your outstanding debt. The taxing authorities are legally allowed to demand payment from accounts receivable, take control of property for auction, and assume title on vehicles. Virtually anything of value can be seized to satisfy the outstanding debt.
When will the IRS initiate collection action against me?
Before the IRS can issue a levy to collect outstanding tax debt the IRS must issue you a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” . You have 30 days to respond to this notice. If you fail to respond to the Final Notice, the IRS will have the option to initiate any of the following:
The IRS has a few ways to issue a levy once you fail to acknowledge the “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” letter.
Bank Account Levy
What is a bank Levy?
An IRS Bank Levy is a process where the IRS seizes the liquid funds from a taxpayer’s bank account due to an IRS tax debt. This means the IRS takes the entire amount in the account(s) to apply toward the tax debt.
When will the IRS initiate a bank levy?
Only after previous attempts to collect a tax debt does the IRS place a bank levy on a taxpayer’s account(s). The first letter, a “Notice and Demand for Payment,” is sent to a taxpayer with the tax debt amount and a deadline for payment. The last letter, a “Final Notice of Intent to Levy,” is sent to a taxpayer that gives 30 days to resolve the outstanding debt before the bank levy is placed.
What happens when a bank levy is attached to my account?
Once an IRS bank levy is attached to a taxpayer’s account(s), the bank is required to hold the seized funds for 21 days. During the 21-day holding period, a taxpayer can make arrangements with the IRS to satisfy the debt, or prove that the seizure would put them in a financial hardship, at which point the IRS may release the funds back to the taxpayer. After the 21 days, if there is no agreement between the taxpayer and the IRS, the bank must send all funds directly to the IRS to be applied to the taxpayer’s tax debt.
While the IRS can levy a taxpayer’s account(s) again, in rare occasions, most bank levies are a one-time occurrence. Only funds existing in the account(s) at that time of the levy are seized. Funds deposited after the levy has been issued are not affected.
Can the IRS levy joint bank account?
Many people believe that any joint accounts they have cannot be touched, but if the account includes the debtor’s name, it is susceptible to an IRS bank levy.
What types accounts can the IRS levy?
The IRS can place a bank levy on almost any type of bank account, including savings accounts, checking accounts, joint bank accounts, mortgage escrow accounts, school bank accounts, or any other type of account that can be seized by the IRS to fulfill the tax debt. IRS bank levies can also be applied to IRAs, 401ks, and other retirement accounts.
In some cases, the IRS can issue an IRS levy on a taxpayer’s federal payments through the Federal Payment Levy Program.
What about Social Security and Medicare?
With this IRS tax levy, the IRS can garnish up to 15% of Social Security benefits until your tax debt is satisfied. Medicare payments can also be garnished until your tax debt is satisfied?
Can Income Tax refunds be garnished?
Yes. State tax refunds can be garnished through the State Income Tax Levy Program.
Property Seizure
This is usually the last resort for the IRS and reserved for the most uncooperative tax debtors.
How can a bank levy be lifted? A bank levy can be lifted quickly if taxpayers pay back the entire tax debt amount in a single payment or make arrangements with the IRS by being placed in an IRS program. The following are arrangements that could be made:
- Request Currently not Collectible status
- Request an individual installment agreement, all missing returns must be filed and manager approval may be needed
- Request an business installment agreement, all missing returns must be filed and manager approval may be needed
- Request an Offer in Compromise, all missing returns must be filed and manager approval may be needed
What other types of Levies are there?
Wage Garnishment – The most common tax levy involves An IRS wage garnishment. Wage garnishment is an aggressive IRS collection action where the IRS seizes a portion of a taxpayer’s paycheck to satisfy a tax debt. A wage garnishment can have a serious adverse affect on your finances and/or job.
The IRS will notify your employer to withhold a portion of the employee’s wages to be paid directly to the IRS or face penalties themselves. For the self-employed, the IRS sends the wage garnishment to the taxpayer’s accounts receivable. Money owed for services rendered is required to be sent to the IRS.
What else can the IRS levy?
The IRS can also levy against:
- Social security
- Welfare
- Disability
- Pensions
- Stocks
- Mutual Funds
- IRAs
What is the difference between a bank levy and a wage garnishment?
Unlike an IRS bank levy, an IRS wage garnishment is immediate and continuous. The IRS Wage Garnishment Table on the official IRS website gives an overview of how much of a paycheck will be left.
Taxpayers can choose from various IRS payment programs, including:
- Installment Agreement
- Partial Payment Installment Agreement
- Currently Not Collectible
- Streamlined Installment Agreement
- Offer in Compromise
Since wage garnishments function as a basic form of a forced, involuntary installment plan, they can sometimes be removed through tax resolution by setting up a regular and approved installment agreement. Besides removing the burden from your employer and giving you the power to handle the payments yourself, an installment agreement can often be set up with payments that are considerably less than the wage garnishment amounts. That is why this form of tax resolution is very common. Click here to read more about Installment Agreements.
NEXT STEPS:
If you are currently being levied or your wages are being garnished, then you must take immediate action, the IRS has you in it’s sights, they won’t forget about you. In fact, it will only increase the pressure to collect from you!
Every tax case is different, but EVERY case has a solution. Offer in Compromise and CNC status are two of several programs, that can help settle your tax debt, and not lose your assets. We can help you figure out the best program for your specific situation, click below for a free consultation with a professional that can guide you to the correct solution.
