Tax levies are amongst the most dreaded collection methods in the Internal Revenue Service’s arsenal. These amount to the legal seizure of your assets to satisfy tax debts. Yes, the IRS still uses tax levies to collect unpaid tax debts. They can and will levy your bank accounts, social security, investment accounts, accounts receivable, wages, insurance policies, and physical assets. What’s more, unlike other creditors, the IRS does not have to bring the levy before a court. Here’s what you need to know.
You Should Know When a Tax Levy Is Coming
There’s no reason why a tax levy should catch you off-guard. The IRS, as well as most state tax authorities, won’t just levy your assets out of the blue. They’ll go through a multi-step process first that should leave you well aware of the impending levy.
First, a tax debt will be assessed. If you don’t file tax returns with money owed yourself, the IRS may file them for you on your behalf; this is known as a Substitute for Return or SFR.
Once the tax debt is assessed, a tax bill will be sent to your last known address. The IRS will send you several letters before issuing a levy. Check your mail frequently, just in case you are receiving these letters. If you are having financial trouble, you should therefore contact the IRS immediately.
Eventually, if you don’t pay this bill, the IRS will send you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. The tax levy can begin as soon as 30 days later. The IRS is required to notify taxpayers of its intent to levy assets at least 30 days before actually doing so–which means you should have plenty of time to prepare and seek legal help.
There Are Multiple Types of Tax Levies
There are several common types of tax levies. The IRS will most likely choose the easiest way for them to get their money. The IRS can levy property you hold yourself, but it can also levy property you have interest in that is actually held elsewhere. You might be subject to:
Wage garnishment – The IRS will take a percentage of your pay.
Bank levy The IRS will put a hold on the funds in your bank account, and then deduct the money 21 days later. They might do this repeatedly if they don’t get enough to satisfy the debt the first time around.
Property seizure – The IRS will take and sell your house, car, boat, or other physical assets.
1099 levy – The IRS will collect any 1099 payments you are currently owed. However, they can’t collect money you might be owed in the future for work you haven’t done yet.
Other asset seizure – The IRS can take your retirement accounts, life insurance, rental income, or other assets you may have.
If you’ve been notified of a tax levy, there’s good news. The IRS would rather not have to levy your assets.
What’s more, once your debt is paid off, the IRS will release your levy. They may also release the levy in cases of extreme financial hardship. Of course, you may not agree with a levy. You have the right to appeal a levy and keep it from moving forward. You can file a Publication 1660 to make an appeal, but you may want to see legal guidance.
Experienced Tax Lawyers Can Help
Owing the IRS any amount of money can be scary, especially if you choose to make an appeal. Fortunately, the attorneys of Mackay, Caswell & Callahan, P.C. can help you deal with tax problems like levies in the best possible way for your situation.
For a consultation, fill out our online contact form or call 844-MCC-4TAX (622-4829). Speak with an experienced tax lawyer from one of our offices in Albany, New York City, Rochester, Syracuse, Utica, and Watertown today.