The process of filing taxes in the United States is a daunting task for many people. The Internal Revenue Service (IRS) has released guidelines and regulations that often confuse taxpayers and tax professionals alike. Luckily, the IRS offers guidance to help individuals navigate these rules. When a taxpayer gets into trouble with the IRS, one way the IRS can collect their debt is through an IRS Levy. Below is a helpful guide on everything you need to know on IRS levies!
What is a Tax Levy?
A tax levy is the seizure of a person's or company's property to satisfy their unpaid taxes. One type of continuous levy is a Wage garnishment, which are one of many ways the IRS has to collect your tax debt. The IRS typically levies all assets, including bank accounts and wages. However, if you have an installment agreement set up with the IRS, they will stop all collection actions against your account.
Will I be arrested if I do not pay my Taxes?
No! The IRS separates their civil and criminal divisions within the agency. Almost all tax debts with the IRS begin in the civil tax section. The only thing the IRS can do in the civil section is charge you more money. It is only after a case gets referred over to criminal can you potentially get into trouble, however this rarely happens.
Which Ways do Tax Levies Collect Tax from Individuals?
There are three main ways that the IRS will collect tax from an individual. They can take wages, seize bank accounts and other personal assets, or use a lien on the property to pay taxes.
What is Wage Garnishment?
A wage garnishment is a process by which the IRS takes money from your paycheck to pay for taxes you owe. A wage garnishment may be made even if there are insufficient funds in your bank account or other assets seized to cover a tax debt.
If a person has had their wage garnished by the IRS because they owe back taxes, it will be taken out of their earnings. This is done by the IRS when a person's income goes above a certain percentage that would correspond with what they owe in taxes for the year.
What Types of Property are not at Risk to Have Taxes Levied?
There is certain types of property that is “exempt” from an IRS Levy. The exempt property would include property such as homes and vehicles. This type of property is generally not included in seizure law because it could be devastating to the individual who owns the property in question and cause undue financial hardship.
What Types of Property are at Risk to Have Taxes Levied?
The types of property that could be seized if back-taxes are not paid off would include bank accounts, cash holdings, and other personal assets. These items might not seem as essential for an individual's livelihood but can still significantly negatively impact their quality of life.
How to Release a Tax Levy?
You can appeal a tax levy by following these steps:
You need to contact the IRS and let them know want to pay.
The next step is to file a written request, which will include information about why you believe that it would be unfair for the property in question to have a tax levy imposed.
The third step is to provide them with documentation that supports your request, including information about the amount of back taxes owed and how you plan on paying off this debt promptly.
Levy vs. lien
There's an essential difference between a levy and an lien. A lien is simply the claim that the IRS has when it believes you owe them money. The process of getting rid of this lien requires submitting their request for payment or taking some other action about your debt, such as filing bankruptcy. It doesn't necessarily mean that the IRS will take any other steps to collect on their lien.
A levy is different because it's a direct order for assets - money or property such as bank accounts and wages - to be taken by the government to satisfy your debt to them. If you're served with an IRS levy notice, there are actions that you can take to avoid the seizure of your assets, but they will require immediate attention.
An IRS levy is a legal technique that the IRS uses for collecting on debts when it becomes clear that you're not going to pay up voluntarily. A levy typically refers to an order from the government instructing banks and employers to turn over money that comes into your account or is owed to you.
A tax levy is a form of seizure that allows the IRS to take possession of property and assets to collect taxes. On the other hand, a lien only provides notice about what might happen if you fail to pay your debt; it does not have any effect until after you look to sell your assets, such as your home or car.
You should also be aware that if the IRS Office of Appeals grants your petition for relief, you are still subject to paying any back taxes owed on this property at a later date; you just won't have to worry about any levy or lien being applied at this time.
When the IRS has assessed that you owe them money and they put a lien on your property; this means that if the property is sold or refinanced in any way during the duration of the back taxes owed, then all of these funds are still subject to being seized by the IRS.
How to Prevent a Tax Levy
If you want to prevent a tax levy, the first thing that you need to do is make sure your taxes are up-to-date. You'll have 30 days from receiving notice of an impending IRS lien on your wages or bank accounts if there's no delinquency in payroll and/or income reporting before they can seize any assets.
The IRS may send you a notice of your unpaid taxes, which will allow you to make payment arrangements. The fastest way to resolve an issue with the IRS is by setting up a direct debit agreement or making monthly payments on your account balance before they can take any enforcement action.
The following are ways to prevent a tax levy:
1) Pay in Full
If you owe the IRS money, they will likely put a lien on your property to make sure that they can recover their losses. However, if you can pay off these back taxes owed in full, then this will remove any possibility of an attempted tax levy from occurring.
This is the best option for anyone who has the ability and means to do this;
if you cannot pay off your back taxes owed in full, then there is still hope.
2) Payment over time
If you cannot pay off your debt in full, the IRS may allow an installment agreement. This will prevent any attempted tax levy from happening by ensuring that a consistent amount is being paid back to them over time.
It should be noted that this method does not guarantee against a seizure of assets; if you are unable to make payments on time or if you are not paying off the total amount that needs to be paid for your debt to be considered fully satisfied, then a tax levy could still happen.
However, this is one of the better options available as it does lower the risk of having assets seized by up to 90%.
If you have been unable to pay taxes owed to the IRS in full, you should contact them.
3) Make an Offer in Compromise
If you have been unable to pay all your outstanding taxes, the IRS may be willing to negotiate. This is done by submitting a request for an offer in compromise, which requires that you submit detailed financial information, including income and expenses and any assets or liabilities. The more assets you own, the less likely it is that you will be accepted for an offer in compromise.
If your request is approved, the IRS will halt all collection action and release any liens filed on your property
What is an Intent to Levy Notice?
An Intent to Levy Notice is a letter from the IRS that advises you of an impending levy. It is sent via certified mail with instructions on how to stop it.
This notice is usually issued when the IRS has tried to collect from you in some other way.. If you receive this notice, there could be severe consequences if you do not respond quickly!.
What are the consequences of an Intent to Levy Notice?
When you receive this notice, and the IRS proceeds with a wage garnishment, your employer must withhold money from your paycheck to pay off any tax debt that is owed until a settlement can be reached or all legal options have been exhausted. Your assets will also be frozen, and it may make it difficult for you to get loans.
What can you do when an Intent to Levy Notice is served?
If this notice has been issued, then it may be possible for you to enter into a settlement agreement with the IRS and avoid having assets frozen or money withheld from your paycheck until that debt is satisfied. However, to get around any of these consequences, you will need to act quickly.
Suppose an Intent to Levy Notice has been issued. In that case, you must contact a tax attorney as soon as possible for them to work with the IRS and come up with a settlement agreement or other alternative so that your assets are not frozen.
The IRS has several options for collecting unpaid taxes that can be taken at different points during the collection process. The agency will typically notify you when taking one or more of these measures, and it is in your best interest to talk with them as quickly as possible if you want to avoid further complications.