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  • dave rosa

How a Tax Levy Works | Flat Fee Tax Service

Updated: Jun 28, 2019


A tax levy is one of the harshest collection enforcement actions used by the IRS and state taxing authorities. A tax levy is the legal seizure of taxpayers assets to satisfy back taxes owed.

The IRS most likely will use a tax levy to seize your wages, paycheck and/or bank accounts.

A tax levy is different from a tax lien because a tax lien is only a claim to your assets while a tax levy is the actual taking of the assets. The IRS or state taxation authorities may levy your bank accounts, investment accounts, accounts receivable, wages, social security, pensions, insurance policies and actual physical assets.

The Tax Levy Process

If you have a tax debt, you should not be surprised by a tax levy because the IRS (and most other state tax authorities) will go through a series of notices prior to implementing a tax levy. Below are the steps that the IRS goes through prior to levying.

  • Your tax debt will be assessed either by you filing a tax return with money owed or the IRS filed a tax return on your behalf (called an SFR or Substitute for Return). Many taxpayers who call in for their free consultation are under the impression that the IRS "filed their tax return".

  • A tax debt will be sent to your last known address that demands payment for the taxes owed.

  • You haven't paid the tax bill that was sent to you or made some other form of arrangement to pay.

  • The IRS sends a Final Notice of Intent to Levy and Notice of Your Right to A Hearing. Your tax levy will start as soon as 30 days after this notice. The IRS is only required to mail out the Notice to Levy. It isn't the responsibility of the IRS that you actually receive the tax levy notice. This became law with the 1998 IRS Restructuring and Reform Act

The Smart Top Tip Is:

Call the IRS Tax Relief Team at Flat Fee Tax Service, Inc.


Tax Levy Types

The form of tax levy that the taxing authorities uses varies depending upon the situation of the taxpayer. The IRS will typically use the enforcement action that will be easiest for them to recoup the money that is owed. Below are the common tax levy types:

Wage Garnishment:

With a wage levy or wage garnishment, the taxing authority will contact your employer and demand your employer (HR department) take out a certain percentage of your pay for unpaid taxes. A tax levy on your wages is "continuous" which means that the tax levy stays in place unless the levy is stopped and released. Employers will almost never deny this request because the IRS or state tax authorities can hold them liable for the amount owed that should have been deducted. THE IRS TAX ATTORNEYS AT FLAT FEE TAX SERVICE, INC. CAN STOP YOUR TAX LEVY ON YOUR WAGES IN ONE DAY.

Bank Levy:

With a bank levy, the IRS will contact your bank and demand that your bank put a hold on your funds. Then, 21 days later, they deduct them from your account. If they do not satisfy the debt in full the first time they levy, they may keep coming back as more money appears in the account. A tax levy on your bank is for 21 days which includes Saturdays, Sundays and holidays. You don't have a single moment to waste if you want to keep your money.

Property Seizure:

With this form of tax levy the IRS or state taxing authority may seize almost any form of asset in order to sell it to cover tax debts owed. They could seizure items such as your car, boat, motorcycle or house.

1099 Levy:

With this form of a tax levy, the IRS or some states may actually issue many levies to collect your 1099 payments. That's 100% of your money. The IRS can levy any amount you are owed currently.

"Other" Asset Seizure:

Through the Federal Payment Levy Program (FPLP), the IRS can seize a minimum of 15% of your Social Security, Social Security Disability (SSDI) and/or Veterans Pension. The IRS can seize your state tax refund.

Seizure of Passports:

This is becoming a "popular" IRS tool for enforcement. Our IRS tax relief team has seen an uptick in taxpayers living abroad. These people may have a wife and family and if their passports are revoked, the host country will kick them out. This could tear apart a family. The IRS can request that the State department can revoke, or deny your passport if you owe at least $50,000 or more.

Stopping a Tax Levy

If you find your yourself either with a tax levy or a notice to levy, you may feel like the "Grim Reaper" has come to visit should you choose to do nothing. The IRS computer chooses to enforce collection with a tax levy. The IRS computer matches you, your tax debt and your employer and "just like that" the IRS is taking your money. To stop a tax levy it will require swift action by an IRS Tax Attorney working on their behalf. There are many different types of arrangements that can stop a levy, below are a few.

  • Enter into a payment plan:

The IRS and state taxing authorities offer a variety of payment plans (installment agreement) depending upon your financial situation. Once an installment agreement has been made on a payment plan the levy will stop.

  • Submit an Offer in Compromise:

If you cannot pay your tax debt, you may very well qualify for an IRS settlement through the Offer in Compromise. This option exists for the taxpayers that qualify and are struggling financially. Call Flat Fee Tax Service, Inc. and find out if you qualify to settle with the IRS.


  • Prove financial hardship - Currently not Collectible:

If you owe less than $10,000, which is the minimum for an Offer in Compromise, you could be placed into Currently not Collectible status. The IRS will leave you alone if it is proven to them that you cannot pay your tax debt. Being Currently not Collectible is not limited to taxpayers who owe less than $10,000. The IRS will file a Federal tax lien but the Statute of Limitations will continue to run out.

  • You could File an appeal:

You may appeal the tax levy if all taxes were paid before the notice was sent. Furthermore, you can appeal if you were in bankruptcy when the notice was sent, there was a procedural error in the assessment, you want to make a spousal defense, or you want to discuss other collection options. Sometimes, you can appeal because you did not have the opportunity to dispute the tax liability, or the statute of limitations has expired on the debt owed.



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