An IRS tax levy permits the seizure of property to satisfy a tax debt including garnishing wages, taking money in your bank account, taking & selling real property.
The IRS Issues Millions of Tax Notices Yearly
An IRS tax levy is a legal seizure of your property to satisfy a tax debt when you owe money to the IRS. Levies are different from liens. A lien is a legal claim against property to secure payment of the tax debt.
A levy actually takes the property to satisfy the tax debt and the IRS most often levies your bank account for whatever amount of money you have in the account after several attempts to collect.
Where does Internal Revenue Service (IRS) authority to levy originate?
The Internal Revenue Code (IRC) authorizes levies to collect delinquent tax. See IRC 6331. Any property or right to property that belongs to the taxpayer or on which there is a Federal tax lien can be levied.
Property exempt from IRS
The Internal Revenue Service must take the following steps prior to an IRS tax levy being issued. The IRS will usually take action only after these three requirements are met:
- IRS assessed the tax & sent you a Notice and Demand for Payment (a tax bill);
- You neglected or refused to pay the tax.
- The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before the levy.
The IRS may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested.
Please note: if the IRS levies your state tax refund, you may receive a Notice of Levy on Your State Tax Refund.
When will an IRS tax levy be issued?
If you do not pay your taxes and the IRS determines that an IRS tax levy is the next appropriate action. The IRS may take any property or right to property you own or have an interest in.
For instance, the IRS could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).
Or, the IRS could seize and sell property that you hold (such as your car, boat, or house). TheCPATaxProblemSolver can get the levy lifted within 24 hours so that you can breathe easier.
How long does it take to get a levy released by the IRS?
If you show an economic hardship is caused by the bank levy you can get a levy released fairly quickly. If you fail to reach an arrangement within the 30 days of notice from the IRS, the bank levy will take effect. The funds in your account will be frozen & set aside for 21 days.
Levy or Garnishment? We can help!
Levies do serious damage to a taxpayer
A levy is the IRS’s way of getting your money and your immediate attention. What they are saying is, “We have tried to communicate with you, but you have ignored us. If you own it, we can take it.”
That includes bank accounts, autos, stocks, bonds, boats, pension checks, paychecks, and even Social Security checks!
Imagine waking up one morning and finding your bank accounts have been cleaned out. If this amount did not cover what is owed, they will keep filing levies until they have collected every dollar you owe. They know that levying your bank account will cause checks to bounce, alerting many people that you have tax problems.
They do not care! Their sole objective is to collect the taxes owed. Period.
As bad as a bank levy is, a worse problem is a wage levy (or garnishment). That is when most of your paycheck goes to the IRS or State, and they do not even leave you enough to pay the bills.
If that doesn’t accomplish what they want, they’ll pull out all the stops.
They can seize and sell your assets.
UNDERSTANDING IRS LEVIES
If you are one of the millions of American taxpayers who find themselves in the IRS’s crosshairs, an IRS levy is stressful and disruptive at best, and financially catastrophic at worst.
The IRS is in the business of collecting money for the Federal Government and often finds itself in the position of needing to compel taxpayers to meet their tax obligations. Levies are one of the tools they use for that compulsion.
The IRS prefers seizing liquid assets such as bank accounts, wages (through garnishment), and social security benefits. However, they will also seize and liquidate assets such as retirement accounts and cash value life insurance policies. The IRS will even seize and liquidate vehicles and real estate if the assets hold sufficient equity to justify the cost of the liquidation process.
Frequently Asked Questions
Which branch of government is responsible for levying taxes?
Congress has the power to levy taxes. The U.S. Constitution gives Congress the authority to collect taxes, duties, and excise fees for the purpose of paying debts (Article 1, section 8). Because this power involves such matters as raising revenues, authorizing expenditures, and borrowing money, it's sometimes referred to as a "power of the purse.”
What is a tax levy?
A tax levy is a government's legal power to compel persons subject to that power to pay taxes. The term levy may mean either the "collection" or "enforcement" of the tax.
What is a notice to levy from IRS?
A "Notice to Levy" is a writ authorizing the Internal Revenue Service (IRS) agent to seize property or assets belonging to an individual or business taxpayer for collection of debt. This document differs from other IRS legal Writs in that it does not directly order or instruct the person with whom the levy was served to pay the debt immediately, but only requires them to turn over funds of their own volition when they have sufficient funds available for payment of debts.
Can IRS levy my bank account?
IRS can levy your bank account. It all depends upon how much do you owe in taxes and how many times did you ignore the requests of the IRS for paying what you owed. You should understand that you can be levied if your income tax returns are not filed for 3 years and the IRS has sent you notices repeatedly to make payments. In the case of people who are employed, usually, they will get notices from employers as well, requesting them to pay taxes on what they owe under their company name.
What is a tax levy release?
If you owe the government money (for example, back taxes), the government can take funds from your bank account to recoup the debt. However, for tax levies that were issued before 1990, if the IRS takes too much money from your bank account they have to reimburse you later. This is called a 'tax levy release.’
I’ve received an IRS notice of intent to levy, what do I do?
If you get this notice, then the IRS has decided to file a tax lien on one of your assets.
- Gather as much information as you can about taxes that may be owed by contacting a CPA or meeting with your accountant.
- Depending on what you decide, consider consulting with a tax attorney before deciding how best to proceed. Any action is better than inaction; however, waiting too long could cause more damage than is necessary and will cost more in the long run.
GET INVOLVED AND DO SOMETHING! Don't wait until it's too late.