Unfortunately, there are a number of issues taxpayers face when they fail to file a tax return, or ignore a tax bill from the IRS. The IRS might file a tax return for you and assess more tax than you owe and/or assess substantial penalties and interest. To collect back due tax balances, the IRS uses several methods. A tax levy is issued when a taxpayer does not pay overdue back taxes.
What is a Tax Levy?
A tax levy is often used by the IRS to collect tax balances. As defined by the IRS, a tax levy “permits the legal seizure of your property to satisfy a tax debt.” Tax levies are issued if the following three requirements are met:
- The IRS sends a ‘Notice and Demand for Payment’ of a tax balance.
- The IRS sends you a ‘Notice of Intent to Levy’ regarding the unpaid tax balance.
- The IRS sends you a ‘Final Notice of Intent to Levy and Notice of Your Right to a Hearing’) at least 30 days before the levy. The IRS sends this notice via certified mail.
Is a Tax Levy the Same as a Tax Lien?
To be clear, a tax levy is different from a tax lien. A tax lien allows the IRS to place a claim on any real or personal property you have, including any land you own. A tax lien could prevent you from refinancing or buying a home. If you receive a letter regarding a tax lien or tax levy from the IRS, you should contact a tax attorney who will explain what the notice means and what your options are.
What are the Consequences of a Tax Levy?
A tax levy grants the IRS the right to seize or take real or personal property from a taxpayer to satisfy any past due tax balances. The most common type of levy is a levy on your wages or a levy on your bank account. If you receive an IRS tax levy notice, you should consider obtaining legal counsel from a tax attorney. Tax levies are a very serious matter, and can cause serious financial problems if not addressed in a timely manner.
How Do I Get Rid of a Tax Levy?
Taxpayers have the right to contact the IRS and request a ‘levy release.’ Methods to address a levy and obtain a levy release include:
- Payment Plan – Taxpayers can request a payment plan, otherwise known as an installment agreement, to pay a tax balance. An installment agreement could make your tax account eligible for a tax levy release, depending on the terms of the agreement.
- Appeal – The IRS often allows a taxpayer the right to appeal a levy. In certain circumstances, the IRS may agree to release the levy.
- Offer-In-Compromise – For taxpayers who can prove an overdue tax debt causes financial hardship, the IRS will consider reducing the amount of tax owed. Filing an Offer-In-Compromise (OIC) application can be an extensive process, but in certain circumstances, the filing of an OIC will result in the release of a levy.
- Bankruptcy – In some, but not all cases, bankruptcy will cause a levy to be released. However, taxpayers should be aware of the financial consequences of filing for bankruptcy, and should not file for bankruptcy for the sole purpose to avoid the levy.
How Do I Get Help With My Tax Levy?
If you are notified that a tax levy is being placed on your tax account, it can be helpful to contact legal counsel in the tax field. Experienced tax attorneys can explain what is the best way to deal with a tax levy. Contact Mindy Meigs expert tax attorney for help with your tax levies.