What is a tax levy?
When the IRS or a State has failed to collect back taxes, they will begin to seize assets. If phone calls and letters are not returned, they will take the next step. This process is called a “levy”. Levies and wage garnishment can be the most stressful and humiliating of all collection tactics. They do this to force taxpayers into willful compliance. If the IRS files a Federal tax levy, the IRS can legally wipe out your bank account. The IRS does have the option to seize your personal property and convert it to cash to satisfy your outstanding debt. The taxing authorities are legally allowed to demand payment from accounts receivable, take control of property for auction, and assume title on vehicles. Virtually anything of value can be seized to satisfy the outstanding debt.
When does will the IRS initiate collection action against me?
Before the IRS can issue a levy to collect outstanding tax debt the IRS must issue you a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing”. You have 30 days to respond to this notice. If you fail to respond to the Final Notice, the IRS will have the option to initiate any of the following:
The IRS has a few ways to issue a levy once you fail to acknowledge the “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” letter.
What are the different types of tax levies?
Wage Garnishment – The most common tax levy involves An IRS wage garnishment. Wage garnishment is an aggressive IRS collection action where the IRS seizes a portion of a taxpayer’s paycheck to satisfy a tax debt. A wage garnishment can have a serious adverse affect on your finances and/or job.
The IRS will notify your employer to withhold a portion of the employee’s wages to be paid directly to the IRS or face penalties themselves. For the self-employed, the IRS sends the wage garnishment to the taxpayer’s accounts receivable. Money owed for services rendered is required to be sent to the IRS.
What else can the IRS levy?
The IRS can also levy against:
- Social security
- Mutual Funds
Can wage garnishments be lifted?
If the levy on your wages is removed through tax resolution, the wage garnishments will be stopped. An IRS wage garnishment can be released if the taxpayer files all past income tax returns, completes a financial statement, and makes a sincere effort to pay off the tax debt.
Taxpayers can choose from various IRS payment programs, including:
- Installment Agreement
- Partial Payment Installment Agreement
- Currently Not Collectible
- Streamlined Installment Agreement
- Offer in Compromise
Since wage garnishments function as a basic form of a forced, involuntary installment plan, they can sometimes be removed through tax resolution by setting up a regular and approved installment agreement. Besides removing the burden from your employer and giving you the power to handle the payments yourself, an installment agreement can often be set up with payments that are considerably less than the wage garnishment amounts. That is why this form of tax resolution is very common. Click here to read more about Installment Agreements.
What about Social Security and Medicare?
With this IRS tax levy, the IRS can garnish up to 15% of Social Security benefits until your tax debt is satisfied. Medicare payments can also be garnished until your tax debt is satisfied?
Can Income Tax refunds be garnished?
Yes. state tax refunds can be garnished through the State Income Tax Levy Program.
This is usually the last resort for the IRS and reserved for the most uncooperative tax debtors.
What is the difference between a bank levy and a wage garnishment?
Unlike an IRS bank levy, an IRS wage garnishment is immediate and continuous. The IRS Wage Garnishment Table on the official IRS website gives an overview of how much of a paycheck will be left.
If you are currently being levied or your wages are being garnished, then you must take immediate action, the IRS has you in it’s sights, they won’t forget about you. In fact, it will only increase the pressure to collect from you!
Every tax case is different, but EVERY case has a solution. Offer in Compromise and CNC status are two of several programs, that can help settle your tax debt, and not lose your assests. We can help you figure out the best program for your specific situation, click below for a free consultation with a professional that can guide you to the correct solution.