Tax Levy

The IRS has several ways to get money from people who haven't paid their taxes. Don't ignore unpaid taxes to the IRS, because the taxing authorities won't just let you off with a warning. 

 

What is an IRS Tax Levy?
  

What is an IRS Tax Levy?

An IRS tax is when the IRS can seize your property or other assets to satisfy a tax debt. If you owe money to the IRS and don't do anything to pay it back, the IRS or the state could take your property. 

The IRS and state tax authorities have the authority to seize money from your bank account, deduct a portion of your wages from your paycheck, and levy a variety of other assets. Most of the time, tax levies are only used after the IRS has sent you multiple notices asking you to pay your taxes and you haven't replied.

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What Gives the IRS Authority to Issue a Levy?

  

Section 6331 of the Internal Revenue Code permits the IRS to levy to collect outstanding taxes. 

 

What are the IRS Procedures for a Levy?

The following must occur before the IRS can proceed with a levy:

  1. The IRS is required to assess your tax and issue a bill. A Notice of Deficiency or other IRS notice may be sent to you.

  2. You missed the deadline in the notice to pay your bill or discuss an alternative solution with someone else.

  3. The IRS will send another notice, the Notice of Intent to Levy. You can request a hearing within 30 days. 

The IRS can proceed with the levy after the 30-day deadline has passed. Your bank or employer must follow an order from the IRS to apply a levy against your assets or wages. 

IRS agent taking a property
IRS Levy

IRS Notice of Intent to Levy

The last notice you must receive before the IRS can confiscate your property is the Notice of Intent to Levy. The notice will also explain your collection due process (CDP) rights, including your right to request a hearing. 

Collection Due Process (CDP) Hearing

You have 30 days to submit a written request for a CDP hearing. Unless one of the following exceptions applies, the IRS will not seize your assets during these 30 days:

If you file a CDP hearing, you can try to avoid the levy by challenging the tax liability, providing a collection alternative, or demonstrating that the assessment would cause financial hardship. While the CDP hearing is continuing, the IRS will not proceed with the levy.

In certain circumstances, you may be able to request an equivalent hearing after the 30-day period has passed. The IRS can collect on your account while the hearing process takes place. 

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Types of Intent to Levy Notices

You may receive any of the following notices when the IRS is threatening to levy your property: 

  1. CP 504. The IRS uses this notice when they will levy your state tax refund. You don’t have the right to request a CDP hearing for this type of levy.
  2. CP 90/CP 297. This notice is used to inform you that the IRS may levy federal payments you receive. The levy could include Social Security benefits, federal salaries, or other federal payments.
  3. 1058/LT 11 Letter. These notices will list your unpaid balance and inform you of an impending levy. You have 30 days to request a CDP hearing. A Notice of Federal Tax Lien may also be issued, even if you request a hearing.
  4. CP 91/CP 298. This notice refers specifically to a levy of Social Security benefits, and the IRS usually sends this notice after a CP 90 or CP 297. 

Each notice should state how much you owe and inform you that you have 30 days to request a CDP hearing. 

  

What are the Different Types of Levies?

The IRS has the power to seize a wide variety of assets. However, as outlined below, only a limited number of property types are specifically safeguarded from an IRS levy.

 

The IRS has the power to seize a wide variety of assets. However, as outlined below, only a limited number of property types are specifically safeguarded from an IRS levy.

Bank Levy

The IRS can seize any funds in your bank account that are accessible for withdrawal. If you owe the IRS more money than your bank account is worth, they can take your entire account. 

The IRS can nevertheless collect the amounts if you have the right to withdraw funds from a shared bank account. It makes no difference whether the money was deposited into the account by you or someone else. 

Wage Levy

A wage levy, also known as wage garnishment, is a type of levy that occurs regularly. The IRS can't take your whole paycheck, but they can use a levy to take a small amount from each of your paychecks until you've paid all of your back taxes. 

The amount you will receive from the IRS is determined by your filing status and the number of dependents you have. The IRS will send your company publication 1494, which will detail how much will be exempt from the penalty. If your employer does not respond within three days, the exempt amount will be calculated using the married filing separately, no dependents, filing status. They can take 100% of your pay from a single company if you have many sources of income. 

For example, if you are married, filing jointly with 3 children, and paid biweekly, you can keep $1,503.84 per paycheck, with the rest going to the IRS. 

Property Seizure

The IRS uses this type of levy when the taxpayer is uncooperative, and other levy methods are ineffective. The IRS has the authority to seize your home, vehicle, boat, and most other forms of property. However, the IRS cannot seize property that is anticipated to yield zero net proceeds. If your mortgage debt exceeds the fair market value of your home, the IRS cannot seize it because all proceeds would be directed to your mortgage lender.

Social Security Levy

The IRS is authorized to withhold up to 15% of your Social Security benefit payments via the Federal Payment Levy Program (FPLP). This levy can be applied regardless of the monthly amount you receive in Social Security benefits. Under the FPLP, only Old Age and Survivors benefits are subject to automatic levies. While the IRS can manually levy disability payments, it cannot seize lump-sum death benefits, SSI, or children’s benefits.

 
  

How Do I get a Levy Released?

Contact the IRS immediately to address your tax obligations and request the release of the levy. We are available to assist you with this process. The IRS may also lift a levy if it finds that it is causing immediate financial hardship. If the IRS rejects your request to lift the levy, you have the right to appeal this decision. You can appeal either before or after the IRS imposes a levy on your wages, bank account, or other assets. Once the levy funds have been transferred to the IRS, you can file a claim to have them returned. Additionally, you can appeal if the IRS denies your request to return levied property.

  

How Can I Prevent a Levy from Happening in the Future?

No one wants to deal with the IRS, but IRS levies are especially stressful. It’s important to do everything you can to avoid a tax levy.

To avoid a future tax levy, it's crucial to manage your taxes diligently. Ensure you file and pay your taxes on time each year. If you're unable to pay in full, arrange a payment plan with the IRS. Also, if you have any outstanding taxes, please resolve them as soon as possible. Ignoring it won't help, as the IRS will eventually pursue you. Acting quickly can make a significant difference. By following these guidelines, you can reduce the risk of facing a tax levy from the IRS.

 

What Assets are Exempt from Tax Levies?

The IRS has the right to levy most assets, but some laws prohibit them from levying certain types of assets. The assets below are exempt from tax levies:

  • Educational books
  • Mail that has not been delivered
  • Income from worker’s compensation
  • Personal belongings valued at less than $6,250
  • Business essentials: Supplies necessary for the taxpayer to earn income
  • Unemployment income
  • Child support is mandated by the court
  • Government assistance payments, such as welfare and SNAP food benefits.

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Conclusion - Choosing the Right Tax Levy Attorney

Selecting the right tax attorney to get your levy released is an important decision. The subsequent sections delve into the essential qualifications and experience required of an attorney, offering guidance on how to select a legal representative wisely. The lawyer's role extends beyond protecting your assets and recovering them as quickly as possible if they have been taken. Engaging a qualified attorney assures professional legal representation, which can yield substantial benefits throughout the levy process.

 

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