Tax Levy is a scary thing for many people. Tax levies are an order by the IRS to take funds from your bank account or paycheck in order to pay off what you owe them.
More: Certified Letter from IRS: 7 Reasons You Might Get One
Tax Liens and Tax Levies can be difficult if not impossible to avoid, but there are ways that you can fight back against them!
In this blog post, we will go over some of the ways that you might be able to get out of Tax Liens and Tax Levies.
What Is a Tax Levy?
A tax levy is a legal procedure by which your property may be taken to pay off a tax debt. Do you think you’ll be levied? You may be wondering if there are any alternatives available for avoiding significant, life-changing losses that might stem from back taxes. The answer is that there are some things you can do to get back on track
Unfortunately, the IRS has full authority under federal law to do this if a taxpayer is delinquent. The IRS does not need your permission to begin seizing assets, property, money, paychecks, and more.
What Is a State Tax Levy?
A tax levy is a state’s option for seizing your assets if you owe taxes. Each state has its own methods and laws. However, if you haven’t paid your taxes, your state is allowed to take away your bank accounts and receive paychecks through garnishment.
What Causes a Tax Levy?
A Tax Levy can be caused by a variety of reasons, but the most common is when a taxpayer owes back taxes to the IRS. Other reasons can include not filing tax returns, not paying taxes that have been assessed or fraudulent activities.
What Is a Tax Levy on Property?
A property tax is a legal seizure of your property that is intended to fulfill the tax debt you owe. Taxpayers are informed of potential levy action through a Final Notice of Intent to Levy and Notice Of Your Right To A Hearing, which informs them of impending levy action.
The IRS can seize and sell your wages if a levy has been established. The IRS has the authority to also take your car(s), house(s), and other personal belongings into custody and sell them if they are delinquent in paying taxes.
The IRS may also utilize a bank levy to enforce asset collection. This means the IRS will instruct your bank to shut down all of your accounts and funds. If your tax debt is not paid in full after 21 days, money trapped in frozen accounts is transferred to the IRS. You have no control over whether or not your bank honors the demands of the IRS.
What Is a Tax Levy on My Paycheck?
A wage levy is a type of wage garnishment. Because your employer has to withhold money from your paychecks at the request of the IRS, garnishment might be rather excruciating and difficult.
If the IRS comes after you with a wage levy, you can expect to lose 30% to 70% of your earnings each pay period. Your wages will be “held hostage” until your employer is informed that your tax debt has been settled in full by the IRS.
If you’re facing tax levies, knowing your rights is crucial. The IRS is not allowed to take away unemployment compensation, disability payments, child support, specific kinds of public assistance, or certain goods that are believed to be necessary.
What Is a Levy Release?
A levy release simply means that the IRS agrees not to take money out of your salary or seize your property to pay off your tax debt. A levy release isn’t something that happens overnight. To obtain a levy release, you must file a request. Here are some things you can do to help:
- File an appeal.
- As soon as possible, pay your tax debt in full.
- Make enough regular payments to attempt to get the IRS to remove a lien from public record.
- Request an Offer in Compromise (OIC) to settle your outstanding taxes for a lesser amount than the total owing.
- File for bankruptcy.
Getting a levy lifted is never simple, as anyone who has ever dealt with IRS levies will tell you. It’s far from being an insurmountable challenge, though. You may be able to improve your chances of getting the IRS to agree if you obtain the assistance of a tax professional.
IRS Levy Release
The most frequent approach to have a levy removed is to show that the levy is resulting in an immediate economic hardship. However, there are a few more components that might lead to a levy being lifted. Here’s what they are:
- You’ve paid your debt in full.
- The collection period closed before the levy was issued.
- You may be able to avoid paying taxes if you release the levy.
- You’ve signed up for an Installment Agreement with provisions that prevent you from continuing to pay the debt.
- There’s simply no way for you to pay your basic, reasonable living expenses when you’re unable to work due to the levy.
- The value of the property is greater than or equal to the amount owed.
A levy is not the same as debt forgiveness or reduction. You must still pay the remaining amount owing. This might be accomplished by making a lump payment or working with the IRS to settle your debt.
Bank Levy Release
When it comes to a bank levy release, the best defense is prevention. That’s because once the IRS takes money from your bank account, it’s tough to get it back. It is not difficult to obtain money back. However, it is preferable that you take action to have a bank levy canceled within the 21-day period after receiving notification.
What Is a Tax Levy Fee?
Simply put, a tax levy fee is an amount that the IRS or another state taxing authority plans to take. The “fee” will be added to your current balance in unpaid taxes. When seizing money, wages, or assets, the IRS is not allowed to seize anything more than your total outstanding balance.
Your bank might charge you a processing fee for your levy. These costs can be as much as $150. If a bank charges you a legal processing fee in the fine print of your account agreement, there’s not much you can do about it. The IRS will reimburse you if your levy was applied incorrectly and incurred an excess filing cost.
How to Stop a Tax Levy
If you cannot pay your debt in full or reach an agreement with the IRS to halt a tax levy, it will be necessary to do one of those things. You might be able to claim financial hardship as an excuse for avoiding a levy. In addition, levies can be appealed. Any effort to prevent a tax levy should be handled by consulting with a tax professional.
Can a Tax Levy Be Reversed?
Yes, it’s conceivable that the IRS will reverse levies in some situations. If you’ve already paid your tax bill in full, for example, you might be able to get your money back from the IRS. After all, if you can pay cash into a levy by way of a payment plan or demonstrate economic hardship, the IRS may reverse the levy.
The two most popular choices on the table are either to appeal before the IRS activates a levy or to submit a claim requesting that levied funds be returned after they have been seized.
Who Do I Call About a Tax Levy?
We connect you with a team of tax experts and attorneys who are eager to assist. While the outcomes vary case by case, we’ll do our best to help you obtain a tax levy alleviated or reversed. They can analyze your unique circumstances to help you strategize your next move.
Give a call today to get started