How Does a Tax Levy Work
One strategy that the IRS sometimes uses when they have not been paid is a tax levy, which is when they seize your money or your property to satisfy the debt. The IRS can levy your wages, your bank account or even property that you own to satisfy this outstanding debt.
Before you get too worried, you should understand how a tax levy works, so that you can determine if this is a step that the IRS is likely to take in your case.
Notice From the IRS
The first thing that you should keep in mind is that the IRS will not levy your pay or property without notice. Specifically, you should receive multiple notices before this action is taken.
The first one is called a Notice and Demand for Payment and it is typically mailed. If you still do not pay the taxes owed, you will receive more written notices and a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. The final notice will come 30 days before the levy will be imposed against you and will come by special delivery of some sort (certified mail, delivered in person by IRS representative, etc).
You will not be surprised if and when the IRS imposes a levy. Most taxpayers actually receive up to 5 written notices before a levy is filed.
How the IRS Chooses What to Levy First
The IRS prefers to levy bank accounts, where they can quickly access funds without having to sell property or wait to receive the tax debt payment over a period of months (from a paycheck).
Once a levy is issued, you lose a lot of control over your finances and the IRS may have to levy more than one element of your property (bank levy and a levy on your property for example).
A tax levy is extremely disruptive and can destabilize your entire financial situation and negatively impact your credit score, so avoid a levy if at all possible.
Removing the Levy
The way to remove the tax levy on your property, paycheck or bank account is fairly simple: make arrangements to settle your tax debt – immediately. Realizing this is not easy. If it were, you would have paid the debt when you received the first notice, but there are still steps you can take. You can file an extension to pay, apply for an installment agreement that allows you to pay the debt over time, apply for an offer in compromise (pay less than you owe) or you can request a status that indicates that you are currently not able to pay. All of these solutions are easier to manage EARLY in the process and may require the help of a tax professional.
If you or your business has received communication from the IRS about a pending levy, the time to act is now. The longer you delay, the worse things will get. If you’d like the advice of a professional that has helped others in your situation, contact Success Tax Relief today. We offer initial consultations at no cost so you can get the help you need without the financial stress.