Either way, you work hard for your earnings. As a responsible adult, you have to pay taxes on those earnings. But what happens when you are unable to pay or can no longer cover back taxes?
You may have a family or currently support just yourself
The IRS has a series of penalties and collection actions they may pursue to go after delinquent taxpayers.
The bottom line is that you can’t ignore unresolved tax debt because the taxing authorities is not going to back down and leave you with a simple warning.
Tax levies are one of the more severe actions utilized by the IRS. Levies allow the IRS to freeze your bank accounts, garnish wages, and seize other assets.
A levy is a legal seizure of your property to satisfy a tax debt. It’s important to note that levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes money and/or an asset to satisfy the tax debt.
If you do not pay your taxes (or make arrangements to settle your debt), the IRS or a state taxing authority may (in extreme situations) seize and sell any type of real or personal property that you own or have an interest in.
The IRS usually levies only after these three requirements are met:
The IRS assessed the tax and sent you a Notice and Demand for Payment.
You neglected or refused to pay the tax.
The IRS sent 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.
The IRS 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 with a return receipt requested.
Consequences of Tax Levies
Back taxes are among the most difficult debts to eliminate. Bankruptcy doesn’t always eliminate all of your taxes owed, which makes it complicated to get out of the dilemma. Furthermore, the federal government gives the IRS a lot of power when it comes to bringing down harsh collection actions to collect a tax debt.
Liens and levies are the two most serious collection actions that the IRS takes against tax payers.
Tax levies provide the IRS the legal right to take your assets. With a tax levy, the IRS may:
Freeze your bank accounts.
Garnish your wages.
Seize personal property.
Seize assets like cars and other vehicles that you own.
Examples of Tax Levies
Here are a few examples of how tax levies can inhibit your life and hurt your future:
You owe taxes, and the IRS places a levy. You go to the bank to withdraw funds, and the bank notifies you that the IRS froze the account. Now you can’t access any of your money.
Every two weeks when you receive a paycheck, you get the usual deductions. Now, you also have a significant portion of your earnings held back because that money goes to the IRS to satisfy the debt. The leftover money may not be enough to pay your bills.
The IRS seizes your property. You lose a home or car, and you will not recoup anything from the sale. All the proceeds go directly to the IRS to resolve back taxes.
The IRS has significant power much different than any other creditors. Therefore, if you owe a substantial amount in back taxes, you should speak with us immediately before the IRS pursues additional action.
When Does the IRS Start a Levy?
A levy is a procedure the IRS uses to collect money that you owe to the federal government. Consequently, the IRS may collect funds in several different ways to resolve the debt.
It is vital not to let your back taxes get to the point of a levy. Thankfully, there is usually enough time to act before the IRS even sends a warning of a tax lien or levy. If you do find yourself facing a levy, contact a tax professional immediately to discuss your options.
The good news is that most taxpayers are not caught off guard by collection actions. Generally, taxpayers have a lot of notice before things get to the point of a lien or levy.
Typically, the IRS will take the following steps:
The liability is assessed after you file a tax return, or the IRS files a tax return on your behalf.
Individuals who owe money receive a tax bill from the IRS notifying them of how much they owe. The letter is sent to the last known address on file at the IRS. This is why some delinquent taxpayers do not receive important notices if they have not filed returns in years, or have recently moved.
The IRS generally gives you ample time to resolve the tax debt. During this time, you can arrange a resolution that is within your cash flow means.
You will receive a Final Notice of Intent to Levy. The letter will also contain a Notice of Your Right to a Hearing. Once you receive a Final Notice of Intent to Levy, you have 30 days to act before the IRS can start freezing your accounts, garnishing wages, and seizing assets.
Levies are a last resort for the Internal Revenue Service. Therefore, if you receive a Final Notice of Intent to Levy, it is incredibly important to speak to a tax professional immediately. Don’t wait for the issue to worsen.
How to Remove Levies?
If the IRS levies your wages, salary, or federal payments, the levy will end when:
The levy is released.
You pay your tax debt.
The time expires for legally collecting the tax.
If the IRS levies your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows time to resolve the matter. After 21 days, the bank must send the money plus interest, if it applies, to the IRS.
If you are facing a bank levy, contact Levy & Associates immediately. Levies are serious matters best handled by tax professions with in-depth experience in tax resolution.
Our team is prepared to help you. We will research the details of your unique situation and advise you on the best actions and likely results. We’ll also represent you and negotiate with the IRS to free up your resources as quickly as possible.
“Greg, Lance, Stephanie and team are some of the most amazing people I’ve had the pleasure of working with! They are on point when it comes to helping our crew out with our IRS tax issues! They saved our company and the owner so much money already! Thankful for Levy & Associates!!”– Erica Dell
“I had an IRS issue that no one was able to help me with. Someone recommended that I call The Levy Group so I did. They helped me with resolving a very difficult situation. I very thankful with what they were able to accomplish.”– David Carpenter
Contact Levy & Associates for all Your Tax Resoltion Needs
Levy & Associates is available 24/7. We’re happy to answer any questions you have about the tax resolution process and address any concerns about your specific situation.
There’s never a good time to have a tax problem, and the time-consuming process will take away from your business or family if you try to face this alone. Let us handle and coordinate communication, so you can return to your daily life.