An IRS levy is one of the most serious consequences of neglecting to file tax returns and pay back taxes. Once issued, the IRS can seize property, including your wages or funds in your bank account, to satisfy past due tax balances. An IRS levy can affect your job and make it difficult to pay your monthly bills. So what steps can you take to protect yourself from an IRS levy?
Keep Good Financial Records
Tax season is not the time to start trying to organize your financial records. It’s important to keep all important financial information in a single place with a clear method of organization before you try to file your tax return. Try and stay ahead by filing records as they come in so you can easily reference whatever information you need when you file your return.
Once you’ve organized your financial records, it’s a good idea to create a backup of the documents in case of emergency. If you prefer to go digital, scan duplicates of the files that you can reference on your computer. Worried about privacy? Investing in a fire safe that can hold copies of your financial records is another method.
File Correctly and On Time
Aside from keeping good financial records, the next best way to protect yourself from an IRS levy is to file your tax return correctly and on time. Simply by filing correctly and on time, you avoid substantial penalties which ultimately makes it easier to pay the tax you actually owe. It’s always best to file complete and accurate tax returns and adhere to tax return deadlines.
Pay Your Back Taxes
Even if you file accurately and on time, the IRS may still determine that you owe back taxes. When you receive notice that you owe taxes, respond right away with accurate information and/or pay as quickly as possible to avoid consequences like late payment penalties or an eventual IRS levy. In circumstances where you cannot pay in full right away, there are payment options, including a monthly payment plan (installment agreement) or an offer-in-compromise. Eligibility for these payment options are based, in part, on whether you have filed all required tax returns.
Address Tax Liens
Before the IRS issues a levy, the IRS may file a tax lien. A lien differs from a tax levy in a few key ways. A tax lien encumbers any real or personal property you have. A tax lien can prevent you from refinancing your home or purchasing a new home. While a tax lien has several consequences that can impact your financial freedom and options, it does not give the IRS the right to seize your property. However, unaddressed tax liens may lead to a tax levy.
Consult with a Tax Attorney
Worried you may be at risk for an IRS levy or have you already received a Final Notice of Intent to Levy? Contact a local tax attorney and have them review your standing with the IRS. A licensed tax attorney can provide individual counsel for your personal situation and help you decide how to proceed. Additionally, an experienced tax attorney can provide assistance with scheduling back tax payments, managing existing levies, and navigating the complex IRS system. In certain circumstances, tax attorneys may be able to secure a release of the tax levy altogether.
Help Me Manage My IRS Levy
Do you need help preventing or navigating an IRS levy? Speak with a licensed expert for personalized financial advice. Contact Mindy Meigs expert tax attorney for help with an IRS tax levy.