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What is a Tax Levy?


America's favorite EA standing with her arms folded in a blue blazer and white blouse.

I've been in the tax industry since 2011. In my experience, there are two major fears of people who owe the IRS without the ability to pay them. Number one is going to jail and number two is the IRS clearing out their bank account or taking their home.


Today, I'm going to talk about fear number two. The technical term for the IRS clearing out your bank account is a tax levy. A tax levy allows the IRS to legally seize your property to satisfy a tax debt.


This does not stop at your bank account. §6331 gives them the authority to levy any property or right to property after the IRS has filed a Federal tax lien. They can also levy your income before you receive it. We refer to this as a wage garnishment. This includes wages from your employer or retirement income. The IRS can take your pension and social security income! The IRS tells them what amount to withhold by sending them a lock-in letter. This also tells them where to send the payments.


If you are a business owner they can also levy your business bank accounts and accounts receivable. This means if anyone owes you, the IRS can intercept that payment before you receive it. They can also intercept your future federal and state tax refunds and apply it to your balance.


Levying your account is not the first step of action the IRS takes to collect their money. You have rights as a taxpayer, even if you do owe the IRS. One of those is the right to a fair and just tax system. This means that you can expect the IRS to consider your personal situation and how it may affect your ability to pay or provide information on time.





This does not mean that they will forgive everything and sweep it under the rug. But it does mean that they are willing to work with you if you communicate with them. Most taxpayers qualify for an installment agreement. Part of the fair and just system means that they will not automatically go for the levy.


Four things must happen first:


  • The IRS has to assess the tax and send you a Notice and Demand for Payment (CP14).

  • You neglected or refused to pay the tax. If you have unopened tax notices stacked up this qualifies as neglect.

  • The IRS sends you a Final Notice of Intent to Levy (CP504) and Notice of Your Right to Appeal. This is 30 days before the levy.

  • The IRS sent advance notification of Third Party Contact notifying you that the IRS may contact third parties about collecting on your tax liability. This is a lock-in letter.

If you have received any of those notices you need to take action as soon as possible. The IRS is on its way to enforce collection activity on your account.


I never judge anyone's tax competency. So, can you handle this situation yourself? I honestly don't know without the details of your tax situation. If you have interest in working with an Enrolled Agent, someone with the highest credential the IRS awards, you can book a call with me and my team at www.Bowenstaxsolutions.com. If you're curious what that process would look like you check out episode 37 of the Tax Relief with Timalyn Bowens podcast, The Tax Relief Journey.


To stop the IRS from issuing a tax levy you have to set up a payment arrangement with them. Communication is key in this process. If the amount you owe is less than $10,000 and you meet other criteria you may be eligible for a Guaranteed Payment plan. If you are not eligible for a Guaranteed Payment Plan you may qualify for a streamlined agreement to pay off the debt within 72 months.


Unfortunately if you cannot pay the debt off within 72 months or before the collection statute expiration date (CSED) things won't be easy. The CSED is the last date that the IRS can legally collect the debt from you. If you can't pay the debt off before this date or 72 months, whichever is sooner, and you owe more than $250,000 the IRS is going to get in your business. You will have to turn in financial information, noting your bank accounts, physical property, income, and expenses. This financial information goes on IRS Form 433-A or 433-F.


If you are beginning to feel overwhelmed by the thought of this process don't allow it to make you freeze. Book a call with me at www.Bowenstaxsolutions.com to stop the IRS from cleaning out your bank account or seizing your property today.

 

Timalyn S. Bowens EA is America's Favorite EA and Tax Expert who will work hard to find a customized legal solution for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn can fight the IRS for taxpayers in all 50 states. As the host of Tax Relief with Timalyn Bowens and a YouTube content creator she empowers taxpayers to make educated decisions about their tax situation.


When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with your tax issues and preventative care. Visit our website at www.bowenstaxsolutions.com for more information.

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