If you are unable to pay your owed taxes to the IRS, it is possible for the IRS to impose a levy in order to regain what you owe. Levies can be collected through the seizure of your assets including your bank funds, future wage earnings and through other means such as property seizure.
What is a Bank Levy?
A bank levy is when the IRS takes money for your taxes owed directly from your personal bank account. A 21-day hold is placed on the funds in your account. After the hold period, the funds will be released to the IRS as payment for your taxes owed, unless you make other arrangements with the IRS to repay your debt during the hold period.
What is a Wage Levy?
A wage levy occurs when a partial amount of your wages are held until the full tax debt has been collected. The amount exempt from the wage levy is determined by your personal tax exemptions.
A levy will be released when your taxes owed have been paid in full. However, it is possible to have a levy released prior to full repayment if you are able to prove that the levy is causing an economic hardship, which means you are unable to meet your basic living requirements while the levy is imposed. Once a levy is released, it is important that you contact your IRS office and arrange a payment plan or other arrangements to ensure the debt is paid. If you do not, it would then be possible for the levy to be imposed again until the debt has been collected.
How to Avoid a Tax Levy
One of the best ways to avoid any tax levy would be to pay your taxes owed on time; although, it is understandable that this may not always be an option. Be sure to contact the IRS and talk through your options for payment. In some cases, a payment plan can be created or there may be other tax debt solutions that can be arranged (such as an Offer in Compromise) to lower the amount you will have to pay to cover the debt.
Are you in the process of dealing with a tax levy? Let us help! Contact us for a free consultation about how to resolve your tax levy.