Tax Levy
Demystifying Tax Levies: A Quick Guide
Understanding Tax Levies
Essentials of a Tax Levy:
A tax levy is an IRS collection tool to seize assets for unpaid taxes. Seizable assets include bank accounts, investments, wages, and physical assets.
Tax Levy Types and Tactics:
- Wage Garnishment: Deducts a percentage from the taxpayer’s wages until the debt is settled.
- Bank Levy: Freezes funds for 21 days, allowing the IRS to claim the owed amount.
- 1099 Levy: Collects existing 1099 payments.
- Reduced Tax Refunds: Withholds federal and state tax refunds.
- Property Seizure: Auctions owned property to settle the debt.
- Other Asset Seizure: Targets various assets like retirement accounts, stock dividends, and licenses.
- Seizure of Passports: Requests the State Department to revoke a passport for back taxes over $50,000.
Navigating the Tax Levy Process:
- Tax Assessment: IRS assesses the owed taxes.
- Billing: A tax bill is sent with the specified payment due.
- Warning Letters: IRS issues warnings of consequences for non-payment.
- Final Notices: “Final Notice of Intent to Levy” and “Notice of Your Right to a Hearing” provide a 30-day resolution window.
- Levy Initiation: After 30 days, the IRS can initiate the levy.
Halting a Levy: Strategies and Solutions:
- Timely Payment: Paying taxes in full and on time.
- Installment Plans: Negotiating a structured repayment plan with the IRS.
- Appealing: Taxpayers can appeal a levy citing financial hardship or innocent spouse status.
Reversing a Levy: Conditions for Consideration:
- Timely Notice: Levy occurred before receiving a 30-day notice for a hearing.
- Procedural Flaws: Reversal can be pursued for IRS procedural errors.
- Asset Necessity: Seized property is crucial for earning income.
- Installment Agreements: Existing installment agreements can warrant a levy reversal.
Expert Guidance: Who to Contact:
- IRS Contact: Direct communication with the IRS for guidance.
- Professional Advisors: Consult a CPA, Enrolled Agent (EA), or local tax attorney for comprehensive assistance.
Understanding tax levies empowers taxpayers to navigate these financial waters with clarity and strategic foresight.