What Is a Tax Levy? Understand the Types, Process, and Solutions
Updated: Apr 18, 2019
TAX LEVY - IRS WAGE GARNISHMENTS - IRS BANK LEVIES
What is a Tax Levy?
A tax levy is when the IRS takes property or assets, such as your wages, paycheck and/or bank account, to cover your outstanding tax bill. It only happens in cases where you have failed to pay your tax debt and have not set up some sort of installment agreement with the IRS. A tax levy is the most potent collection mechanism used by the IRS, and the IRS’s rights to subject you to a tax levy go far beyond the rights of any other creditors. Remember, the IRS is the most formidable debt collector in the United States.
Will the IRS Levy
By the time the IRS starts to levy and seize your assets, you should have received numerous notices and demands. The IRS will only seize your assets if the following things have already happened.
The IRS sent you a notice demanding payment on your tax debt.
You ignored the notice or failed to make payment arrangements.
The IRS sent you a notice of the intent to levy and gave you 30 days to appeal.
The IRS can start to levy and seize your assets at the end of that 30 day period. This levy can be stopped. Your IRS Tax Attorney can contact the IRS and have your levy stopped. A licensed tax professional with experience in tax resolution can analyze your financial and tax situation to pursue the best IRS options on your behalf.
Exceptions to the 30-Day Levy Notice Requirement
In rare cases, the IRS can levy your wages or property before sending you a Final Notice of Intent to Levy and Right to a Hearing. They may seize the property of yours without giving you notice beforehand. Here are some reasons why the IRS may do this:
The IRS Jeopardy Levy
If the IRS feels that the collection of the tax is in jeopardy, they can seize your property without notice in advance. For example, if you are looking to leave the country, if you are dissipating assets by moving them outside the country, transferring them to other persons, or your “financial solvency is or appears to be imperiled,” they can levy without notice beforehand.
Disqualified Employment Tax Levy
The IRS serves a Disqualified Employment Tax Levy (DETL) for the seizure of unpaid employment taxes. A DETL usually happens if you previously requested a Collection Due Process appeal on payroll or employment taxes for other periods within the past two years.
Federal Contractors and State Tax Refunds
If you are a federal contractor the IRS does not need to notify the taxpayer of the levy until after the tax levy ensues. Moreover, the IRS can seize state tax refunds without offering hearing rights 30 days in advance.
What Property Can the IRS Levy?
The IRS will start the tax levy (#IRStaxlevy) by reaching out to people or organizations who pay you. The IRS tells these entities to send future payments directly to the IRS rather than to you. In most cases, these entities or individuals comply because if they don’t, the IRS holds them personally responsible for those amounts. That includes the following:
IRS Wage Garnishment
Wage garnishment is the most common form of IRS levy. The IRS contacts your employer and instructs them to withhold a certain percentage of your wages. It is illegal for your boss to fire you over a wage garnishment, but it can be embarrassing and financially painful. The garnishment stays in place until the debt no longer exists, the taxpayer makes alternative arrangements with the IRS, or the period to collect the debt expires.
IRS Bank Levy
With this form of levy, the IRS contacts your bank and requests the funds in your account. Usually, you have a 21 day grace period to address the situation. The 21 day window includes Saturdays, Sundays and holidays. The funds are frozen in your bank account during this time frame so you cannot withdraw or use them.
IRS Social Security Levy
The IRS can even demand the Social Security Administration send 15 percent of your payments. Through the Federal Payment Levy Program (FPLP) the IRS can take 15% from your Social Security check. The same goes for Veteran's checks.
IRS 1099 Levy
If a business or individual owes an independent contractor money, the IRS can demand they send any money owed to the contractor to the IRS instead. The IRS can issue a series of 1099 levies to collect on 1099 income.
POOF! 100% OF YOUR MONEY GONE
In addition to those items, the IRS can contact the holder of your retirement account, tenants who live in buildings you own, and nearly anyone else who pays you money.
Other Property the IRS Can Seize
The IRS can also seize real estate, land, cars, and boats. The IRS can take anything of value and sell it (auction it) to cover the tax debt. However, the IRS rarely seizes these types of property. In fact, the IRS will only do this in extreme situations.
How Can You Stop a
Tax Levy in One Day?
That's an Easy One.
Flat Fee Tax Service, Inc.
IRS Wage Garnishment Phone Number
If you are receiving notices from the IRS, you need to take immediate action. A tax professional, like our IRS tax relief team, can help you get back into good standing with the IRS or State. Usually, a taxpayer needs to get into filing compliance to set up a resolution with the IRS or State.
Once the IRS seizes assets, it is difficult to get them back. Therefore, it is very important to take action quickly. With a tax levy, we highly recommended leveraging a licensed tax professional.