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Tax Levy

What You Need to Know

A tax levy is a legal tool the Internal Revenue Service (IRS) uses to legally seize an individual’s assets or property to settle a tax debt. Unlike a civil judgment, the IRS doesn’t need a court order to issue a levy. Many individuals are caught off guard when they find out a levy has been enforced against their assets, leading to significant financial hardship and complications.

A tax levy can target almost any of your assets or properties. The taxpayer’s vulnerable assets include your home, vehicles, land, retirement accounts, pension, cryptocurrency holdings, rental income, and salary or wages. The IRS can also impose a bank levy, freezing your personal or business accounts. However, there are certain exemptions to what the IRS can seize.

During the notification process, the IRS will attempt to notify you of an impending IRS tax levy. They will send a Notice and Demand for Payment, which can be delivered to your workplace or your last known address.

Additionally, the IRS will send a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least 30 days before taking action.

Expert Assistance for Your Tax Levy Concerns

Tax levies might sound intimidating, but they become manageable with the right knowledge and approach. With a clear understanding and the assistance of tax experts, you can confidently navigate any tax levy situation without a sweat.

Let’s Tackle Your Tax Levy Together

Amity tax professionals are dedicated to transforming the daunting into the doable. Our team of experts is equipped to guide you on the best course of action, be it setting up a payment plan with the IRS, filing an appeal, or exploring other resolution options.

What's the Difference Between a Tax Lien and a Tax Levy?

Both tax liens and tax levies are tools employed by the IRS to address unpaid taxes, but they function differently. A tax lien is essentially a legal claim against your assets. It acts as a public record, signaling to other creditors that the IRS has a priority claim over your property. This doesn’t mean the IRS immediately begins seizing assets, but it does affect your ability to sell or refinance them.

On the other hand, a tax levy is more direct and aggressive. It’s the actual process where the IRS legally seizes your property or assets to cover the tax debt. This could mean taking money from your bank accounts, garnishing your wages, or selling your properties.

How Can I Prevent a Tax Levy?

Preventing a tax levy starts with proactive communication and action. If you receive any IRS billing notices, it’s essential to address them immediately. If you owe money, consider paying the full amount as soon as possible.

If you can’t pay in full, the IRS often allows taxpayers to set up payment plans or negotiate a settlement. Ignoring IRS billing notices or neglecting back taxes can escalate the situation, leading to levies or other severe actions. Regularly checking your tax status and seeking professional tax advice can also help prevent levies.

Can the IRS Levy My Social Security Benefits?

Yes, the IRS has the authority to levy Social Security benefits. However, they do consider the taxpayer’s living expenses. The IRS can take up to 15% of your Social Security payments under the Federal Payment Levy Program.

However, certain amounts or types of Social Security benefits might be exempt, ensuring you retain enough for basic living expenses.

What Happens After a Levy is Issued?

After a levy is issued, the IRS will proceed to seize the specified assets or property. If it’s a bank levy, funds in your bank accounts might be frozen and eventually sent to the IRS. If the levy is on real property, assets like your home, vehicles, or land might be sold off.

For wage garnishments, a portion of your wages will be deducted and sent to the IRS each pay period. This will continue until the tax debt is settled, other arrangements are made, or the levy is released.

Can a Tax Levy be Reversed?

Reversing a tax levy is possible but demands quick and decisive action. As soon as you’re aware of the levy, consider appealing it. The IRS provides a window (usually 30 days from the notice date) for taxpayers to file an appeal. During this period, the levy action is typically halted. You can also request a hearing to discuss the levy with the IRS.

If you demonstrate that the levy causes immediate economic hardship, the IRS might consider releasing it. Setting up a payment plan or negotiating a settlement are other avenues to potentially stop or reverse the levy.

How Does a Bank Levy Work?

A bank account levy is a specific tax levy targeting your bank accounts. When the IRS issues a bank levy, your bank is legally obligated to freeze the specified funds, preventing you from accessing them.

The bank will then hold these funds for a 21-day waiting period. This period allows you to take action by settling the debt, making other arrangements, or challenging the levy. If no action is taken by the end of this period, the bank will send the frozen funds to the IRS.

For expert guidance on tax levies, call us at 866-234-9522 – our Amity One Tax professionals are here to assist you.

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