Have you received a notice of levy from the IRS? Understanding what this document means and how you should respond is essential to avoid any further tax penalties.
A notice of levy indicates that you have unpaid tax debt with the IRS. If you do not pay this debt on your own terms, the IRS will begin seizing your property, wages, or savings to pay the debt for you.
If you’re wondering, “What is a notice levy?” read on to learn about notices of levy and how a tax professional can help.
What Does a Notice of Levy Mean?
A levy is the legal taking of your property to repay your unpaid taxes. A notice of levy is the way the IRS informs you that it will issue a levy if you do not take any action to pay your bill in the meantime.
The IRS typically sends notices of levy in the mail. Once you receive this IRS notice, you will have thirty days to repay your tax debt or make arrangements to settle the debt. If you do not make such arrangements within this period, the IRS can begin seizing your property and selling it or taking money out of your wages to repay your debt.
When Does the IRS Issue a Levy?
The IRS will not issue a levy simply because you owe taxes. The agency gives you a few opportunities to pay your debt or arrange a payment plan first.
Typically, the IRS will only issue a levy after four things occur:
- The IRS assesses your tax and sends you a bill.
- You fail to pay that tax bill or refuse to do so.
- The IRS sends a Final Notice of Intent to Levy.
- The IRS sends a notice that it may contact third parties to collect your tax debt.
After these steps, you would receive a levy at least thirty days following the Final Notice of Intent to Levy.
Types of Tax Levies
The IRS can take your property through several different means:
● Wage garnishment: The IRS can request that your employer withhold a portion of your wages from your paychecks to pay your tax bill.
● Bank levy: A bank levy allows the IRS to freeze your bank account and withdraw funds up to the total amount you owe.
● Reduced tax refunds: If the IRS owes you any tax refunds, or if you have a state tax refund, the IRS can take these refunds to repay your back taxes.
● Asset seizure: Through asset seizure, the IRS can take any of your assets that have value or can be liquidated, including your cars, real estate, investments, and jewelry.
● Federal payment seizure: If you receive federal payments in the form of Social Security benefits, unemployment, Medicare payments, or other federal sources of income, the IRS can take a portion of these payments (typically no more than 15%).
Of these methods, the IRS will use whichever seizure method is easiest to secure your property and repay your debts.
What Property Could the IRS Levy?
When you fail to repay your tax debt on your own, the IRS can force you to pay by taking any of your personal property. Specifically, the agency can take:
● Property that you currently possess, such as your car, house, or boat
● Property that you own but that someone else holds for you, such as your wages, dividends, rental income, or life insurance loan value
All your property is fair game in a tax levy. As a result, you should do everything you can to pay back your tax debt before the IRS resorts to a seizure of your property. Selling a few items yourself to repay your debt may be better than letting the IRS determine what it will seize and sell.
Is a Tax Levy the Same as a Tax Lien?
Sometimes, people confuse tax liens and levies. While both terms refer to tax penalties from the IRS, they encompass different things.
As you know, a tax levy is a legal seizure of your property to repay your tax debt. Meanwhile, a tax lien is a claim on your property. While a levy takes your property, a lien notifies you of the government’s right and intention to take your property if you do not settle your debt.
A tax lien can turn into a tax levy if you fail to make arrangements to pay your debt within 30 days of receiving the lien.
Levy & Associates Can Help
If you have received a notice of levy in the mail, you now have just thirty days to arrange a tax settlement plan to avoid the seizure of your property. Our tax resolution professionals can help you determine the most efficient way to repay your tax debt to avoid any additional penalties from the IRS, including levies.
Our team consists of CPAs, tax consultants, and attorneys who know the ins and outs of tax law. We can review the details of your specific case and help you create a plan to manage your tax debt before the thirty-day waiting period expires.
Contact Levy & Associates today at 800-TAX-LEVY to schedule an appointment with a tax specialist.