IRS Tax Levies
When the IRS decides to seize assets in order to pay off a tax debt, they don’t require a court order and they aren’t limited to liquidating physical property like your car or home. In fact, they can access “any kind of real or personal property that you own or have interest in.” This includes your bank accounts, investments, wages, and even social security, this procedure is called Tax Levies.
To protect your bank accounts and other assets from being seized and liquidated, you will need the support of a Tax Specialist who is not only experienced in contesting IRS Tax Levies against taxpayers but also one who can negotiate a tax relief solution on your behalf. Without a feasible tax relief solution in place, any released Tax Levies may just be reapplied.
Franskoviak Tax Solutions can help you get your Tax Levy released, and stay released, in as little as a day. Not only that, you are guaranteed to get personalized attention for your case as we work to find a payment solution or deal that best fits your situation. Contact us to schedule your free consultation today!
Understanding Wage Levies
If the IRS seizes your wages, a portion of your earnings will be sent to them in each pay period until certain conditions are met:
- You make other arrangements to pay your overdue taxes,
- The amount of overdue taxes you owe is paid, or
- The levy is released.
A portion of your wages may be exempt from the levy, and this exempt amount will be paid to you directly. The exempt amount is determined based on the standard deduction and a calculated value that takes into account the number of dependents you are allowed for the year the levy is served.
Within three days, your employer will provide you with a Statement of Dependents and Filing Status, which you need to complete and return. It is important to submit this statement within the given timeframe. Failure to do so will result in your exempt amount being calculated as if you are married filing separately with no dependents, which means the exempt amount will be zero.
If you have additional sources of income, the IRS may allocate the exemptions to those income sources and levy 100% of the income from a specific employer.
Q. What if the wage levy creates a financial hardship?
A. The IRS understands that having your wages levied can cause significant financial hardship. If you are facing economic hardship, you may be eligible for a Partial Payment Installment Agreement (PPIA) with the IRS. This agreement allows you to pay off your tax debt in installments over an extended period of time, and the amount you pay each month is determined based on your income and expenses.
Alternatively, you may also be eligible for an Offer in Compromise (OIC), which allows you to settle your tax debt for less than the full amount owed. To qualify for this option, you must prove that paying the full amount would create a financial hardship for you.
Q. What if I believe the wage levy is incorrect or unjust?
A. If you believe that the wage levy is incorrect or unjust, you have the right to appeal the decision. This process involves submitting a written request for a Collection Due Process (CDP) hearing within 30 days of receiving the notice of levy. The CDP hearing provides an opportunity for you to present your
Q. I currently make direct child support payments to my ex-spouse rather than going through my employer. I’m seeking guidance on how I can have this amount exempted from the levy so that I can continue making these payments without any interruptions.
A. If your employer did not include child support in your exempt amount, it is important to reach out to the IRS using the phone number provided on Form 668-W(c)(DO) & Form 668-W(ICS). The IRS will release the necessary funds to fulfill your court-ordered child support obligations, as long as the court order was issued before the levy was received by your employer. It is worth noting that if child support is allowed, the same child cannot be claimed as an exemption when calculating the exempt amount.
Q. “I am set to receive a bonus in addition to my regular paycheck. Are the same exemptions applicable to the bonus payment as they are to the regular wage payment? Or does the entire bonus amount get sent to the IRS because the exempt portion was already paid to me for that pay period?”
A. The IRS will retain the entire bonus as the exempt amount is determined by the time period in which your wages and bonus are paid. For the purpose of wage levy, the term “salary” or “wages” encompasses compensation for services rendered, including fees, commissions, bonuses, and similar forms of remuneration.
Q. “What happens if I am self-employed and do not have an employer to receive a wage levy notice?”
A. If you are self-employed, the IRS can still issue a levy on your income by contacting your clients or customers directly. The levied amount will be calculated based on your net earnings (income after deductions for business expenses).
Q. Is there a way to prevent a wage levy from happening in the first place?
A. Yes, the best way to prevent a wage levy is by staying current on your tax payments. If you are struggling to pay your taxes, it is important to communicate with the IRS and explore options such as installment agreements or offers in compromise before a levy is issued.
Q. Can a wage levy be released once it is in place?
A. Yes, a wage levy can be released if you are able to make other arrangements with the IRS to pay your tax debt or if the amount of overdue taxes is paid off. You can also request a release of the levy if you qualify for an installment agreement or offer in compromise.
Q. Does a wage levy impact my credit score?
A. Yes, a wage levy can negatively impact your credit score if it is reported to the credit bureaus by the IRS. This can make it difficult for you to obtain loans or lines of credit in the future. It is important to address any tax issues promptly and work towards resolving them before they have an adverse effect on your credit. So, it is always best to stay on top of your tax payments and communicate with the IRS if you are facing any financial difficulties. Additionally, seeking guidance from a tax professional or financial advisor can also help you navigate through these situations and find the best solution for your specific circumstances.
Overall, wage levies should not be taken lightly as they have serious consequences, but there are options available to help alleviate the financial burden and resolve any outstanding tax debt. It is important to act promptly and follow the necessary steps outlined by the IRS in order to protect your income and financial stability. So, stay informed, stay proactive, and take control of your tax situation before it escalates into a wage levy.
WHAT IS AN IRS TAX LEVY?
An IRS levy permits the legal seizure of your property to satisfy a tax debt. It can involve garnishing wages, taking money from your bank or other financial accounts, seizing and selling your vehicle(s), real estate, and other personal property.
If you receive an IRS bill titled Final Notice of Intent to Levy and Notice of Your Right to A Hearing, contact us right away.
What Is an IRS Levy Release?
The IRS agrees to leave you alone as long as you pay your taxes on time. A levy release simply means the IRS will not take money out of your pay or seize property to cover your tax debt. It won’t just happen by itself; you’ll have to ask for it. Here are some of the strategies that might assist you:
- File an appeal. Make as many consecutive payments as possible to try to persuade the IRS to remove a lien from the public record. Request an Offer in Compromise (OIC) that will settle your outstanding taxes for less than the total amount owing. File for bankruptcy protection.
The most typical approach to have a levy lifted is to show that the tax is causing an urgent financial strain. There are, however, other criteria that might result in a levy being released. Here’s what they are:
- You paid the amount you owe.
- The collection period ended before the levy was issued.
- Releasing the levy will assist you in paying your taxes.
- You signed an Installment Agreement with terms that prevent you from having the levy continued.
- The levy creates an economic hardship by preventing you from meeting basic, necessary living expenditures.
- There is more than enough property to pay the debt, but seizing it will result in an unfair hardship.
- You need the money or property to run a business.
- You can also have a levy released if you can prove that the IRS acted inappropriately. This might occur if, for example, they issued the levy without sending you a Final Notice as required by law.
A levy is not the same as debt forgiveness or reduction. You must still settle your outstanding balance if a levy has been lifted. This might be done by making a lump sum payment or working out a plan with the IRS to pay off your debt.
Getting an IRS levy lifted is not something that anybody with prior experience dealing with IRS levies would tell you is a simple procedure. However, it is not impossible. Using the assistance of a tax professional to guide you through your request for a release may aid in increasing your chances of getting the IRS to agree.
Bank Levy Release
When it comes to a bank levy release, prevention is the greatest cure. That’s because once the IRS has taken money from your bank account, it’s very difficult to get it back. It’s not beyond reach, but taking action to have a bank levy canceled during the 21-day period after receiving the notification is preferable.
What Is a Tax Levy Fee?
The IRS or state taxing authority will collect a tax levy fee, which is the amount it plans to seize. The “fee” will total your present balance in unpaid taxes. When seizing money, wages, or assets, the IRS is not permitted to take any more than the entire value of what you owe.
It’s also conceivable that your bank may charge a processing fee for your levy. These costs can range from $75 to $150, and they’re not uncommon. Unfortunately, if a bank informs you of a legal processing fee in the small print of your account agreement, there isn’t much you can do about it.
Were You Hit With a Tax Levy?
Have you recently been served a tax levy? If that’s the case, there’s a good chance you’ve known about your money troubles for some time. There’s also a high likelihood that you’ve avoided the problem. If you don’t act right now, it’s probable that your property will be seized. Once it happens, there’s almost no chance of getting the property back.
The first step is to take a deep breath and relax. It’s not the end of the world, and it’s certainly not as bad as it could be. With that said, you need to understand that you’re in for a fight. The IRS is not going to simply let you off the hook, and they certainly aren’t going to allow you to keep your property.
The good news is that if your property hasn’t been taken, you still have options. To get some outcomes, you don’t need to pay the IRS in full; if you can transform your status from “won’t pay” to “will pay,” the IRS may cancel the tax levy entirely.
Going up against the state or federal government is no easy feat, but you don’t have to go at it alone. Consider enlisting the help of our tax professionals at Franskoviak Tax Solutions today to give you the best chance at success. Contact us today to get started on remedying your tax situation!
Frequently Asked Questions About
IRS Bank Levies (FAQ)
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What is a Tax Levy?
A levy is the legal seizure of a tax payers’ assets to satisfy any back taxes that they owe. A Levy is different from a tax lien because a lien is only a claim to your assets while a levy is the actual seizure of the assets. The IRS can levy your bank accounts, investment accounts, wages, social security, pensions, insurance policies, and/or some of your actual physical assets.
What happens when you get a tax levy?
An IRS levy is a legal seizure of your property to pay off your tax debt. It can seize and sell your car(s), real estate, and other personal property, as well as take money out of your bank or other financial accounts.
What causes a tax levy?
The IRS will begin a tax levy if you don’t pay the tax lien. So, in layman’s terms, a tax lien is similar to a threat that if you don’t pay, the government will seize your property and money. A tax levy refers to when the government seizes your assets and wealth to satisfy the tax lien.
How can you avoid a tax levy?
If you know that you owe taxes and can’t pay, the best thing to do is contact the IRS immediately. They may be able to work out a payment plan with you. If you don’t contact them and try to work something out, they will eventually begin the process of levying your assets.
What is an example of levy taxes?
A tax or fee that must be paid is referred to as a levy. Sales tax, for example, is an example of a levy.
What happens if you can't pay the tax levy?
If you can’t pay the tax levy, the IRS will seize your assets and sell them to satisfy the debt. This includes things like your car, house, other property, and money in your bank account. The IRS will also put a lien on your property.
Can the IRS just take money out of my account?
The IRS cannot just take money out of your bank account. They must first send you a notice that they intend to levy your account. This notice will give you 30 days to take action to avoid the levy. If you don’t do anything, the IRS will then place a levy on your bank and withdraw the money you owe plus any interest.
How do I stop tax levy on my paycheck?
1) Pay off your tax debt in full. The first way to stop wage garnishment is to pay your tax debt in full.
2) Set up a payment plan. Typically, the IRS is ready and willing to work with taxpayers who owe taxes.
3) Negotiate an Offer in Compromise.
4) Declare hardship.
5) Declare bankruptcy.
6) Work with a tax professional.
How long does an IRS levy last?
If the collection period has ended, the tax should also be released. The IRS is allowed ten years to collect outstanding taxes in most cases, but this time can be prolonged in certain circumstances. You may be able to have the levy lifted if you are experiencing an economic crunch.
How does a levy work?
A levy allows a creditor to withdraw funds from a financial account, such as a checking or savings account. If you’re the subject of a levy by your lender, it implies your lender has frozen your financial account and subsequently taken money out of that account to pay off your debt.
Does the IRS have to notify you of a levy?
Before the IRS can levy your assets, it must give you written notice in accordance with Internal Revenue Code Section 6330. You have 30 days to appeal the threatened collection action after receiving a notice from the IRS.
Can the IRS levy your home?
Yes, the IRS can levy your home if you owe back taxes. The IRS can put a lien on your house, which gives them the legal right to seize and sell your property to satisfy your debt. However, the IRS will only take this action as a last resort after making multiple attempts to collect the debt from you.
The IRS may seize your property if you owe back taxes and refuse to pay. A levy is the most common type of “seizure.”
How does the IRS levy your bank account?
An IRS bank account seizure is when the IRS takes money directly from your bank account to pay back taxes you owe. Typically, the IRS notifies your bank of your tax debts. Following that, your assets must be frozen for 21 days since the day you receive an IRS notification.
Can I cash a check if I have a bank levy?
When a creditor levies your bank account, it gains the right to take money that is already in your bank account. It does not have the authority to take money that you have not earned yet or that is not in your bank account. This implies that the lender has no power to limit how much money you can withdraw from checks.
Can I open a new bank account if I have a levy?
Yes, you can open a new bank account even if you have a levy. However, the IRS may put a levy on that account as well if they are aware of it. It is best to contact the IRS and let them know that you have opened a new account so that they can work out a payment plan with you.
Can you close a bank account that has a levy?
Yes, you can close a bank account that has a levy. However, the bank may continue to hold onto your funds for up to 21 days after they receive the levy in order to satisfy the debt.
How long does a levy stay on your bank account?
The debt must be settled, a settlement has to be reached on the debt, or payments have to be made in such a way that the creditor is satisfied. Regardless of the sort of debt you owe, your money will usually need to sit idle for 21 days after the bank receives a levy.
How often can my bank account be levied?
The IRS can levy your bank account daily, but usually only does so if you owe a large amount of money. If you have multiple levies on your bank account, the IRS will typically only take one levy per day.
How does a tax levy affect your credit?
An IRS tax levy is not reported to the credit bureaus and does not appear on your credit report directly. So, Tax levies don’t directly affect your credit score. However, levies are part of the IRS collection process and the indirect effects can damage your credit for years.
What is the difference between a tax and a levy?
A tax rate is a percentage that is used to calculate how much a taxpayer will pay in taxes. A levy is the total amount of money that a local government may collect using a tax rate. To put it another way, the levy is a limit on how much property tax money a local government can collect through legal authority.
What is the intent to levy from IRS?
A notice from the IRS to seize your assets is an intent-to-levy notification. You generally only receive this notice if you have significant tax debts that you haven’t attempted to pay. It identifies a tax period for which you owe taxes.
Why does the government levy taxes?
A government typically raises revenue through taxation of its individual and business residents in order to finance public works and services—as well as the construction and upkeep of the country’s infrastructure. The revenue is utilized to improve the economy and benefit everyone who lives within it.
What happens if you don't pay levies?
If you don’t pay a tax levy, the IRS can take your paycheck, Social Security benefits, and other types of payments. The IRS can also seize your property, including your home, car, boat, and other assets.
Can you negotiate levies?
It is possible that you can negotiate with a field agent to release your levy. Telephone IRS representatives typically do not have the power to release levies, but field agents generally do. Generally, you are not given the option to negotiate when or how you want to pay your fines. Levy payments must be paid on the first of each month. Hiring a professional is the best option for negotiating the tax levy.
What is a tax lien and how does it differ from a levy?
A lien is a legal claim against your property—including your home, car, and other assets—that gives the IRS the right to take your property if you don’t pay your taxes. A levy, on the other hand, allows the IRS to take your property—including your paycheck, Social Security benefits, and other types of payments—without going through the court system. Levies are typically used as a last resort after repeated attempts to collect unpaid taxes have failed.
Can I stop a Tax Levy?
The IRS generally uses tax levies as a last resort option and would prefer to come to some other arrangement to resolve the taxes owed.
There are many different actions that can stop a levy, below are the most common:
Offer in Compromise (OIC): An offer in compromise is an agreement to pay much less than the total amount of taxes owed. This option only exists for the taxpayers that qualify and are struggling financially.
Payment Plan: The IRS offers a variety of payment plans depending upon your financial situation. Once you establish a payment plan the levy will stop.
File an Appeal: You can appeal the levy if all taxes were paid before the notice was sent. You can also appeal if you were in bankruptcy when the notice was sent, or if you want to make a spousal defense, or you want to request other collection options.
Request Financial Hardship: If it can be proved that the levy is a significant financial hardship for you then the levy may be stopped. This does not mean taxes do not need to be paid, but it will temporarily stop the collection actions and try to settle with a different solution.
It is best to talk with a qualified tax resolution professional to determine if you qualify and which method is the best for you.
There Are Many Different Types of Tax Levies
The type of levy that the IRS might use depends on the situation.
1099 Levy:
The IRS could issue a levy to collect from your 1099 payments. They can levy any amount of money that you are currently owed for work that has already been done, but they cannot go after anything owed to you in the future for work to be done.
Wage Garnishment:
With a wage levy or wage garnishment, the IRS taxing authorities will contact your employer and request withdrawal payments for your unpaid taxes.
Bank Levy:
With a bank levy, the IRS will contact your bank and request that they put a hold on your funds and after 21 days the IRS will deduct the funds from your account. If they cannot collect the full amount owed, they will continue until the debt is satisfied.
Property Seizure:
In this case the IRS can seize almost any form of asset and they sell it to cover tax debts owed. They could seizure items such as your car or house.
Other Asset Seizure Possibilities Include:
If it comes down to it the IRS can also place levies on retirement accounts and dividends, life insurance and rental income.