Tax Levy: How IRS Levies Work, How to Release & Help
What is a Tax Levy?
A Tax Levy is the IRS’s most lethal weapon it possesses and can be the most financially crippling. This mean the IRS will actually seize your assets to satisfy your back tax liability. A tax levy can cause you to lose your checking and savings account, investments, IRAs, accounts receivables, inheritances due to be received, social security, pension, insurance policies, or anything else that you own that carries equity.
When and Why is a Tax Levy Filed?
If you have unpaid back taxes and have not cooperated with the demands of the IRS to make the payments of the tax amount owed, it is likely that eventually you will receive a tax lien followed by a tax levy. The tax levy should not come as a surprise since you most likely received many threatening IRS letters, phone calls, had a lien placed on your assets and finally you would have received a 30 day notice of intent to levy or seize your assets. This letter will be mailed to you, given to you in person, or left at your home or work. If you have ignored all prior notices, this is the one that you must not ignore because this is your last chance to take action and set up a payment plan, offer an offer in compromise or pay your tax debt owed to the IRS before you lose your assets.
Effects of an IRS Levy
A tax levy will affect you more than any other IRS action. Thirty days after your receive your final letter of the intent to levy, the process well begin where the IRS will take action on seizing assets. To do this, the IRS sends out notices to any third parties that they believe might be paying you which include your bank or your employer. These notices say that they must pay the IRS instead of you. When these third parties receive these notices, they will almost 100% of the time honor them because if they don’t, the IRS will hold them personally liable for the amount that they could have collected from you had they honored the notice.
Types of Tax Levies
Depending upon your financial and tax situation the IRS will make a determination of which form of levy to use. The most common form of levies are wage garnishment and bank account garnishment but will not rule out physical asset seizure if they don’t feel they can recoup the unpaid taxes through wage or bank account garnishments.
Wage garnishment is the most common form of IRS levy. Under this form of levy, the IRS makes an individuals employer subtract out a certain amount of money from each pay period to go toward unpaid taxes. Employers just about always follow the requests of the IRS to do this because if they don’t, the IRS will hold the employer liable for the tax amounts that should have been collected through the levy process.
With a bank levy, the IRS can access your bank accounts and monitor them and take money from them in order to satisfy tax debts owed. The IRS will continue to seize what money it can until they have collected enough money to cover the total amount of taxes owed.
This is the least common levy method used by the IRS. This is typically the last resort the IRS uses with an uncooperative taxpayer. The IRS can take personal assets such as house, trailer home, boat, cars and just about anything else except for a short list of items they cannot legally take.
This is a less common tax levy or garnishment method utilized by the IRS compared to other levies. The IRS can garnish up to 15% of Social Security through the Automated Federal Payment Levy Program (FPLP), and manually there is no limit on what they can garnish.
What to Do About an IRS Tax Levy
Get Tax Levy Help
If you have received an IRS tax levy it is important to take the right actions if you want to stop the IRS. The IRS would rather resolve taxes in some other manner rather than a levy but they use a levy as a last resort collection method. Everyone’s situation is different when it comes to their tax problems which is why not everyone should handle a levy in the same manner. It is important to make the right decision about resolving a tax levy based upon your unique financial and tax situation.
Assets that the IRS has already taken may be nearly impossible to get back, but once the levy is released the IRS will stop collection activities. There are many ways to release a tax levy, all the ways fall under two categories, either making good with the IRS or proving financial hardship.
If you don’t agree with the IRS’s choice to levy you have the legal right to appeal. There are many reasons a taxpayer can appeal a tax levy. Understand how to file for an appeal and how the process works.
Doing nothing is really only an option to people who know they will still have the means to survive while the IRS is levying their assets. If you do nothing, the IRS will continue to levy your assets until they have fulfilled your tax liability. Some people who find themselves in a situation where the IRS begins to levy their wages and find that they will be able to bear the inconvenience for a bit until the tax amount is paid back in full to the IRS. For many people, the reason why they cannot pay the IRS is because they simply cannot afford to pay them. Just cause you can’t pay in full, doesn’t mean you can’t pay anything at all or settle to reduce the total amount owed.
If you want to keep the IRS from seizing your assets there are ways to protect your assets from seizure. Sometimes it is best to hire an asset protection professional, but there are some things you can do to ensure the IRS will not take your assets or even to slow down the IRS from seizure of certain assets. For one, contact us and we can tell you if we can help.
Before choosing a method to stop your tax levy it is a good idea to get tax levy help by consulting a tax professional. A tax professional can quickly analyze your financial situation and come up with the best plan of action while keeping your financial interests in mind.
IRS Notice of Levy: Received a Notice of Intent to Levy?
Receiving an intent to levy notice from the IRS can be scary since it likely means that something has gone terribly wrong with your taxes and that you have yet to do anything to fix that problem. While this is clearly not a good situation, you may be able to get back into the good graces of the IRS if you make the right moves and handle the intent to levy carefully to ensure that things do not progress any further.
An intent to levy notice does not mean that the IRS is going to show up at your house, kick you out and take your belongings, but it does mean that you’ve ignored past notices to delinquent taxes and that the IRS is now becoming very serious about collecting.
A tax levy is a way for the IRS to take what you owe since you are unwilling to pay them on your own. In most cases, the IRS will levy your bank account in addition to levying your wages, social security, and other assets. A tax lien may also be attached to your home in conjunction with a tax levy.
How Can I Prevent a Tax Levy?
The best way to prevent a tax levy is to contact the IRS so that you can come to an agreement on how you will pay back the taxes that you owe. You can set up an IRS installment agreement or submit an offer in compromise to slow down the levy process – and possibly even stop it in its tracks – once you begin to pay your back taxes.
As long as you are willing to work with the IRS to find a solution – as opposed to hiding from them – it is a safe bet that you will never have to worry about finding an letter of intent to levy notice in your mailbox.
Are All Tax Levy Notices the Same?
The IRS sends out several different types of intent to levy notices:
- CP 297/CP 90 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing
- CP 523 – Notice of Intent to Levy – Defaulting on your Installment Agreement
- Letter 1058 / LT11 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing
- CP 91/CP 298 – Final Notice Before Levy On Social Security Benefits
CP 297 and CP 90 are letters used as notification of an unpaid balance that the IRS has previously requested payment for, and that IRS intends to levy federal payments, such as Social Security benefits, owed to the delinquent taxpayer.
CP 523 is sent to people who were paying via an installment agreement but defaulted. This notice explains the reason for the default, informs of the intent to levy, and suggests options for resolving the situation.
L-1058/L-T11 typically follows CP 504 (Final Notice Balance Due letter). An L-1058 states that you have a balance that you have failed to address despite all of the notification letters previously sent to you, and warns that after 30 days the IRS will issue a levy on your personal assets.
CP 91 and CP 298 are letters sent to taxpayers who still owe money despite having received letters warning them of a 15% levy on social security benefits that would take effect if their tax bill was not paid off or a payment agreement was not set up. Either CP 297 or CP 90 will usually precede one of these letters.
If you have received a letter of intent to levy, contact the IRS immediately to learn more about the options available to you. Take solace in the fact that if you know your rights, investigate your situation properly, and take a few steps – either on your own or with the help of a tax professional – to rectify your situation, you will most likely get back into the good graces of the IRS.
Request a Free Tax Analysis & Consult Get Started
Relevant Articles On Tax Levies & Help
How To Release a Tax Levy
There are many ways you can release a tax levy. Determining the appropriate method depends upon your financial situation.
IRS CP Notice 90/297 Notice of Intent to Levy
What this notice means and what to do. A notice of intent to levy should not be ignored. The IRS will levy unless action is taken on the tax payers end.
Tax Levy Help
Do you need help with a Tax Levy? Remove or stop an IRS or State tax levy quickly with the assistance of our experienced tax professionals
What If the IRS Garnishes My Wages?
Understand your options of what you can do if the IRS garnishes your wages. If the IRS is garnishing your wages it means you have not resolved your tax debt. Follow these stops to stop the garnishment and settle taxes.
What Can I Do if the IRS Placed a Levy on My Bank Account?
Find out what you can do about your bank levy. The IRS gives many options for you to stop the levy, find the best solution. Our experts can help if needed.
IRS Social Security Garnishment or Levy
The IRS can levy your Social Security. Generally, it is a levy of up to 15% of your benefits. Find out what you can do to stop it.
Appeal IRS Tax Levy
If you don’t agree with the IRS’s choice to levy you have the legal right to appeal. Understand how to file for an appeal and how the process works