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Are you facing an IRS tax levy? You may be wondering if you have any options on the table for avoiding heavy, life-altering losses that could result from back taxes. The fact is that the IRS has the power to collect back taxes through the use of levies. A tax lien can be used to levy any property that you own. The situation can get serious. Unfortunately, the IRS can and will begin seizing your bank accounts, property, car, boat, and other assets if you don’t take action as soon as possible.
What Is a Tax Levy?
A tax levy permits the legal seizure of your property to satisfy a tax debt. Are you facing a levy? You may be wondering if you have any options on the table for avoiding heavy, life-altering losses that could result from back taxes. The answer is that there are some things you can do to get back on track with the IRS or your state taxing authority while potentially avoiding this “last resort.”
What Is an IRS Tax Levy?
A IRS tax levy is an administrative action by the Internal Revenue Service to seize property to cover an outstanding tax bill. Unfortunately, the IRS has full authority under federal law to do this if a taxpayer is delinquent. The IRS does not need your permission to begin seizing assets, property, money, paychecks, and more.
What Is a State Tax Levy?
A tax levy is a state’s option for forcibly seizing your assets if you owe taxes. Methods and statutes vary by state. However, your state likely has the right to seize your bank accounts and garnish your wages if you haven’t paid your taxes.
What Causes a Tax Levy?
Ultimately, not paying your taxes causes a tax levy. The IRS will send you a Notice for Demand for Payment if it concludes that you owe back taxes due to neglect or refusal. The IRS will also send you a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least 30 days before a levy kicks in. Notices are delivered by hand or via the mail. Tax levies can impact both individual returns and business returns.
What Is a Tax Levy on Property?
A levy on a property is a legal seizure of your property to satisfy the tax debt that you owe. Delinquent taxpayers are notified of impending levy action through a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. The IRS can garnish your wages once a levy is in place. In addition, the IRS has the right to seize and sell your car(s), home(s), and other personal property.
The IRS can also enforce asset collection using a bank levy. This means that the IRS will force your bank to freeze all of your accounts and funds. Money that is frozen is transferred to the IRS after 21 days if your tax debt is not resolved in full. There is nothing you can do to stop a bank from complying with the demands of the IRS.
What Is a Tax Levy on My Paycheck?
A wage levy is typically referred to as a wage garnishment. Garnishment can create a very embarrassing and difficult situation because your employer is forced to withhold funds from your checks at the request of the IRS. You can expect to lose anywhere between 30 percent and 70 percent of your earnings each pay period if the IRS comes at you with a wage levy. Your earnings will be “held hostage” until the IRS notifies your employer that your tax debt has been paid in full. Knowing your rights is important if you’re facing a tax levy. The IRS is actually prohibited from seizing unemployment benefits, disability payments, child support, certain types of public assistance, and certain items that are categorized as being necessary.
What Is a Levy Release?
A levy release simply means that the IRS agrees not to take money out of your paycheck or seize property to cover your tax debt. A levy release won’t just happen. You’ll need to request the release. Here are some of the options that could help:
- File an appeal.
- Pay your tax bill in full as soon as possible.
- Make enough consecutive payments to try to convince the IRS to withdraw a lien from public record.
- Request an Offer in Compromise (OIC) that will settle your owed taxes for less than the full amount.
- File for bankruptcy.
Nobody who has dealt with IRS levies in the past is going to tell you that getting one released is an easy task. However, it is certainly far from being an impossible task. Getting a tax professional by your side to help you navigate your request for a release may help to boost your odds of getting the IRS to agree.
IRS Levy Release
The most common route for having a levy released is to prove that the levy is causing an immediate economic hardship. However, there are several other factors that could activate a levy release. Here’s a look:
- You paid the amount you owe.
- The period for collection ended prior to the levy being issued.
- Releasing the levy will help you pay your taxes.
- You entered into an Installment Agreement with terms that don’t allow for the levy to continue.
- The levy creates an economic hardship that prevents you from meeting basic, reasonable living expenses.
- The value of the property is more than the amount owed.
Having a levy released does not mean that your debt has been forgiven or reduced in any way. You are still required to pay the balance due. This can either be achieved through a lump payment or by making arrangements with the IRS to resolve your debt.
Bank Levy Release
Prevention really is the best medicine when it comes to a bank levy release. That’s because it’s extremely difficult to get money returned to you once the IRS has confiscated funds from your bank account. No, it’s not impossible to get the money back. However, it is preferable that you take action to have a bank levy released during the 21-day period after you receive notice.
What Is a Tax Levy Fee?
A tax levy fee simply refers to the amount that the IRS or state taxing authority intends to seize. The “fee” will total your current balance in unpaid taxes. The IRS cannot and should not take anything beyond your balance total when seizing money, wages, or assets.
It’s also possible that your bank could charge a processing fee for your levy. These fees can range from $75 to $150. Unfortunately, there is very little that can be done if a bank notified you of a legal processing fee in the fine print of your account agreement. However, the IRS will reimburse you for bank levy fees if your levy was applied in error.
How to Stop a Tax Levy
It’s going to be necessary to either pay your debt in full or reach an agreement with the IRS in order to stop a tax levy. You may be able to claim financial hardship to get out of a levy. In addition, there are options to appeal a levy. Any attempt to stop a tax levy should be done with the support and guidance of a tax professional.
Can a Tax Levy Be Reversed?
Yes, it’s possible that the IRS will reverse levies in some cases. One example would be if you’ve already paid your tax bill in full. In addition, options for payment plans or claiming economic hardship could result in a levy reversal. The two main options on the table are to either appeal before the IRS activates a levy or file a claim to have levy proceeds returned after they have been seized.
Who Do I Call About a Tax Levy?
Call Tax Group Center! We have a team of enrolled agents and tax attorneys waiting to help. While results vary by case, we’ll work hard to help you get a tax levy lifted or reversed. Let us evaluate your unique situation to help you plan your next step.
Tax Group Center wants to help you protect your personal or business assets. We’re an industry-leading company with more than 30 years of experience behind our name. We have licensed tax pros, CPAs, lawyers, and other passionate professionals waiting to take a look at your situation. Don’t hesitate for one more day if the IRS is coming at you with a levy. Call today to book a consultation!