What is a Tax Levy? What You Should Do If You Get One
Updated: Jan 1
Losing sleep from falling behind on debt is stressful. It is even less fun when a levy is placed on your assets. In this article, we will take a look at what an IRS levy is, why it happens, and what you can do about it.
Note: If you have any tax trouble or owe more than $20k to the IRS or state but can’t pay in full, contact our firm today. Bowens Tax & Bookkeeping Solutions helps people find tax relief. We can resolve your IRS levy without you having to talk to the IRS in most situations. Call today at 502-632-3171.
What is an IRS Levy?
In laymen's terms if you owe back taxes and you ignore the IRS, the IRS can and will seize your property, take money from your bank accounts, sell your home, car, or other assets in order to satisfy the debt that you owe them.
The IRS will continually give you notices via mail before they take this step. Do not let the notices stack up without taking action. If you do not satisfy the debt or make payment arrangements by the specified date, the IRS will attempt to take the amount of the levy directly out of your bank account. You do not want to be banned from your own bank account because of procrastination.
Other types of levies
Private creditors may issue a levy against your bank account with a court order. However, court orders are not required for levies by government agencies. The creditor is required to notify you of the upcoming levy at least 21 days before removing any funds from your account. You may not withdraw money or close the account during this waiting period. It only takes 21 short days for the IRS to take possession of YOUR bank account.
Funds received from child support, social security, unemployment, workers' compensation settlements and certain other types of government agency payments are exempt from levy. They are not automatically exempt, you must request the exemption and offer proof of the source of the funds to avoid them from being taken from you.
Government agencies may also garnish an employee's wages for back taxes, child support and other delinquent payments required by law.
The IRS has the authority to levy up to 85 percent of the employee's paycheck. So let's say you make $1,000 a week. The IRS can take $850 of that to go toward your debt in addition to any other taxes that need to be withheld for Federal, Social Security, Medicare, State, and local taxes. Essentially leaving you with nothing. The levy notice will be sent to your company's payroll or human resources department. You must then withhold the appropriate amount of money from the employee's paycheck and send it to the IRS or state tax board. The employee must provide a wage garnishment release if he is able to work out a payment arrangement.
Note: A wage garnishment release better known as a levy release is something that our firm, Bowens Tax and Bookkeeping Solutions, can help you with. If you are in need of getting a lien or levy released call our office today at 502-632-3171 or book your call at https://bookingbowens.as.me/taxrelief
If you are behind on your taxes, the IRS may levy most payments from federal agencies. This includes railroad retirement benefits, Medicare supplier and provider payments, payments on contracts between your company and a government agency, federal retirement annuities and travel reimbursements.
You may apply for a hardship exemption if the levy will cause your company undue financial distress. Companies going through bankruptcy proceedings are automatically exempt from IRS levies.
Can the IRS Take Your Assets?
The IRS may also seize your real estate and personal property such as your personal home, a car, or boat. You will receive a 30-day notice indicating that seizures will follow if you do not pay your outstanding taxes or contact the IRS to make payment arrangements. 30 days and your house is gone. This authority also extends to property and money you own that are being held by another party, such as life insurance cash value. The government sells its seized property at auction to recover some of the funds owed by delinquent taxpayers.
What To Do If You Have A Tax Levy
Back taxes will not disappear if you ignore them, no matter how long you wait. Pretending that they do not exist will cause the problem to get worse.
If you have back tax debt, we highly recommend you reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out to our firm today for a consultation today at 502-632-3171 or book your call at https://bookingbowens.as.me/taxrelief .
Timalyn S. Bowens EA is Louisville's Tax Expert and will work hard to find a legal solution that is customized for you!
When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax & Bookkeeping Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with tax preparation, tax representation, tax planning, and more. Visit our website at www.bowenstaxsolutions.com for more information.