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IRS Tax Levy

 IRS Tax Levy

IRS Tax Levy: What It Is and How It Works

The Internal Revenue Service (IRS) is authorized to collect taxes from American citizens, businesses, and organizations. One of the ways the agency enforces this is through levies, which allows it to seize assets until full payment is made. This can be a stressful and daunting experience for those who receive an IRS tax levy notice, but it’s important to understand what it means, how it works, and what can be done to resolve the issue.

What is an IRS Tax Levy?

An IRS tax levy is a legal seizure of property or assets initiated by the IRS to satisfy a tax debt. This can include seizing bank accounts, wages, real estate, or other valuable property. An IRS levy is different from a lien, which is a legal claim against property to secure a tax debt and doesn’t involve seizure of the property.

Before a levy is initiated, the IRS must provide a written notice to the taxpayer, which is usually called a “”Final Notice of Intent to Levy””. The notice explains the amount owed, the payment options available, and the taxpayer’s rights to appeal the decision. The notice is usually sent via certified mail to the taxpayer’s last known address, and it gives the recipient 30 days to respond.

If the taxpayer fails to respond within the 30-day period, the IRS can then initiate a levy on the taxpayer’s assets. The levy applies to all assets owned by the taxpayer, including assets acquired after the levy is initiated.

What Happens After an IRS Tax Levy is Initiated?

Once an IRS tax levy is initiated, the agency may seize and sell the taxpayer’s assets to satisfy the tax debt. The agency has the legal authority to seize a variety of assets, including:

– Bank accounts: The IRS can seize funds from a taxpayer’s bank account to satisfy a tax debt. The agency typically contacts the bank to request the funds and freezes the account, making it impossible for the account holder to withdraw any more money.

– Wages: The IRS can also garnish a taxpayer’s wages, meaning that their employer is required to send a portion of the taxpayer’s earnings directly to the IRS to satisfy the tax debt.

– Property: The IRS can seize real estate, vehicles, or other tangible property owned by the taxpayer to satisfy a tax debt. The agency then sells the property at auction and uses the proceeds to pay off the tax debt.

The IRS is required to send the taxpayer a notice of the levy. The notice should specify the amount of the tax debt, the assets that have been seized, and the taxpayer’s rights to appeal the decision or make alternative payment arrangements. If the taxpayer fails to pay the tax debt or make alternative arrangements within a certain amount of time, the IRS may begin to levy additional assets.

How to Stop an IRS Tax Levy

If you receive a Final Notice of Intent to Levy, there are several ways to stop the IRS from seizing your assets. The first step is to contact the IRS to discuss your options. The agency may be willing to work with you to set up a payment plan, offer a compromise on the amount owed, or waive penalties.

Another option is to file an appeal with the IRS Office of Appeals. This is a separate branch of the IRS that reviews cases and can resolve disputes between the taxpayer and the agency. In some cases, an appeal may result in the levy being lifted or modified.

If the IRS has already levied your assets, you may still have options to get them back. For example, if your bank account has been frozen, you can try to negotiate with the bank to release some or all of the funds. If your wages are being garnished, you may be able to file an exemption claim to reduce the amount being taken out of your paycheck.

It’s also important to seek professional help if you’re facing an IRS tax levy. A tax attorney or a qualified tax professional can help you understand your options, negotiate with the IRS on your behalf, and represent you in an appeal or other legal proceeding.

What Are the Consequences of an IRS Tax Levy?

An IRS tax levy can have serious and long-lasting consequences, both financially and personally. Some of the potential consequences of an IRS tax levy include:

– Credit score damage: The IRS can report tax liens and levies to credit reporting agencies, which can damage your credit score and make it difficult to obtain loans or credit in the future.

– Business impact: If you own a business, an IRS tax levy can seriously impact your ability to operate. The agency can seize business assets, freeze bank accounts, and even shut down operations in some cases.

– Legal consequences: If you fail to respond to an IRS tax levy notice, the agency may take legal action against you, which could result in a court judgment, wage garnishment, or other penalties.

– Personal stress: Dealing with an IRS tax levy can be incredibly stressful and time-consuming. It can also result in personal embarrassment, strain relationships, and impact your mental health.

Final Thoughts

An IRS tax levy is a powerful collection tool that the agency can use to recover unpaid taxes. If you receive a Final Notice of Intent to Levy, it’s important to take action as soon as possible to avoid the serious consequences of a levy. Seek professional help, negotiate with the IRS, and explore all available payment options to get your tax debt under control. With the right strategy, you can resolve the issue and move forward with peace of mind.


What is an IRS Tax Levy?

An IRS tax levy is a legal seizure by the Internal Revenue Service of a taxpayer’s property to fulfill a tax debt. An IRS tax levy is different from a lien. A lien, unlike an IRS tax levy is a claim that is used as a security measure for the debt, while an IRS tax levy actually takes over the property in order to satisfy a tax debt.

If a tax payer does not pay his or her taxes, or if he or she does not make the proper arrangements in order to settle the debt, the IRS may decide to seize and resell any of personal or real property that the taxpayer owns or has an interest in.

Examples of this include:

• The IRS may seize and then sell the taxpayer’s property that the taxpayer previously held, such as a house, car or boat.

• The IRS can also levy taxpayer property that is lawfully the taxpayer’s but is held by another party. This can include salary, wages, dividends, bank accounts, retirement accounts, licenses, accounts receivable, rental income, commissions, or the cash loan amount of a life insurance policy.

The IRS usually only levies after three specific requirements are met:

• The IRS has assessed the tax and has sent the taxpayer a Notice & Demand for Payment

• The taxpayer has refused or failed to pay the tax

• The IRS sent Final Notice of Intent to Levy as well as a levy notice titled the Notice of Your Right to A Hearing at the minimum of 30 days before the IRS tax levy. The IRS can then give the taxpayer this notice either in person, send it to the taxpayer’s last known address by registered mail or certified mail along with return receipt requested, or leave it at the taxpayer’s home or place of business.

A taxpayer can ask an IRS manager to look over the taxpayer’s case, or can also request through the Office of Appeals a Collection Due Process hearing by filing out a request for a hearing with the specific IRS office that listed on received notice. A taxpayer must also file his or her request within 30 days of the date listed on the notice. Some potential issues that can be discussed at the hearing include:

• The taxpayer has paid all the owed prior to the IRS sending the levy notice.

• The IRS has assessed the tax and has sent the levy notice when the taxpayer was in bankruptcy, and thus subject to the automatic stay period during bankruptcy.

• The IRS made a procedural error in the assessment for the IRS tax levy.

• The statute of limitations or the time to possibly collect the tax expired before the IRS sent the IRS tax levy notice.

• The taxpayer was not given the chance to dispute the liability assessment.

• The taxpayer wants to discuss the collection options available.

• The taxpayer wants to request a spousal defense in response to the IRS tax levy.