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Tax Levies Tips
Assets That Might Be Levied
Once you have not voluntarily paid, or agreed upon paying, your back taxes, the IRS starts their enforced collection process. The point where the IRS seizes your assets is known as the IRS tax levy stage. Some of your assets that the IRS may take from you include:
Bank accounts
Personal property such as accounts receivable from your business, computers, furniture
Wages
Income from customers
Vehicles (boats, motorcycles, cars, etc.)
Social Security benefits
Retirement plans
Real property (real estate you own)
Stocks, bonds, investment items (such as dividends)
State and federal income tax refunds, current and future
Accounts that belong to you, but are held by someone else. For example, cash loan value of your life insurance, licenses, rental income, mutual fund accounts.
An IRS levy arrives shortly after the Notice of Lien. You may receive a written notice, or not. An IRS levy can happen even though no a tax lien has not been filed.
An IRS levy occurs only when you have not attempted to contact the IRS or repay your unpaid tax bill. They do not happen totally out of the blue.
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Bank Levy
DebtHelp.com Tip: The bank levy process is complicated when it involves a jointly owned bank account. The bank must pay over all of your bank account funds in response to an IRS levy. It is only then that the co-owner (joint owner) not responsible for the unpaid taxes can file a wrongful levy action. This wrongful levy action will, hopefully, give him or her back the bank levy funds taken away. When you have reached the point in the collection process of having an IRS tax levy against you, one of the first accounts the IRS will seize will be your bank account.
The IRS can take money from your savings, checking, and any other bank accounts in order to satisfy your unpaid tax bill. In other words, they can clear out your bank accounts.
This levy process is the most easily done of any enforced collection process. The transaction is completed with the simple click of a computer key. A computer-generated levy form is sent to any financial institution holding your funds.
Of interest is the fact that once your banking institution receives notice of the levy, it must hold the funds you have on deposit for 21 days. They must hold an amount up to the amount of unpaid taxes you owe. The 21-day holding period is given to dispel any issues regarding who owns the account (as in a joint or co-partnership account). The IRS is sent the deposit money, plus any applicable interest after the 21 days.
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Releasing a Levy
You can have your IRS tax levy removed (released) from your property whenever any of the following situations apply:
You paid the levy and all applicable costs in full.
You have shown the IRS that the levy is causing undue financial hardship on you.
You have shown the IRS that they have a better chance of collecting the taxes if they release the asset.
The statute of limitations ended before you received the levy notice.
You are involved in an installment agreement (unless it states otherwise)
You have shown the IRS that the liabilities on the levied property are less than the fair market value. And, releasing the levy would not hinder collecting the taxes
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Levy Process
DebtHelp.com Tip: After you have received your Notice of Lien statement, you will receive other notices allowing certain time periods in order to take care of your back taxes. If you choose to ignore any of these notices, the IRS levy process starts.
First, you will receive IRS letters all stating the amount of your unpaid taxes and that the IRS is intending to levy your property to satisfy this debt. You will be given references involving IRS Publications that you can refer to for more information. You also will be given information about how you can appeal the levy process. Letters you may receive include:
Letter 11 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing. You should receive this 30 days prior to the levy. Letter 1058 – Final Notice Reply within 30 Days
Letter 1085 – 30-day letter proposed assessment
Whichever you receive will depend upon your individual situation.
After receiving an IRS letter, you will receive a notice regarding your IRS levy.
CP 90 – Final Notice of Intent to Levy
CP 92 – Notice of Levy upon Your State Tax Refund CP 242 – Notice of Levy upon Your State Tax Refund
Once again, which Notice you receive will depend upon your individual situation.
On average, there will be a 30 day period between the time you receive notice of levy and the actual seizure of your property. It does not come unexpectedly.
A written notice of levy can be mailed to a third party holding your property (such as a bank), or an IRS agent can simply show up at your property and take property.
The IRS levy process can extend over months. It is not something that ends in an IRS agent simply showing up at your door while taking your property. You have received ample notice about the process, yet have chosen to ignore it. Therefore, you are paying the consequences. The IRS levy process is the last step in the enforced collection process.
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Tax Lien vs. Tax Levy
You may read about IRS tax liens and IRS tax levies, but not understand what the difference is. Both a tax lien and a tax levy are considered part of the enforced collection process. These methods of collecting your unpaid tax bill are used after you have not voluntarily paid, or agreed to pay, your back taxes.
Tax lien. A tax lien is the first step in the IRS enforced collection process. The purpose of the tax lien is to stake a claim against any of your assets. By filing the Notice of Tax Lien in your county’s public records system, anyone interested has notice that the state or federal government has a claim against your assets. The filing gives the taxing authority priority over other creditors, in most cases.
In short, a tax lien is a claim against your property. You need to pay off the tax lien in order to gain control of your assets.
Tax levy. A tax levy, on the other hand, is a continuation of the enforced collection process. When your unpaid tax bill has reached the point of being unsatisfied, the taxing authority will slap a tax levy against your assets. This means they can seize any and all of your assets to pay off your unpaid tax bill. Also, you may not receive an advanced notice.
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Wage Levy
If you are a wage-earner (are an employee of someone) you may be affected by a wage levy. Another term for wage levy is wage garnishment.
This is the second most popular way for the IRS to levy your assets. They simply target your wages.
If you are self-employed and receive income from l099 various sources, the IRS can also levy notices to those businesses or individuals.
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State Tax Levy
The IRS is involved with many states in a program titled ‘State Income Tax Levy Program' (SITLP). Not all states are involved in this program. The purpose of this program is to allow the IRS to levy your state income tax refund to satisfy any delinquent federal tax bills. The program matches the state income tax refund database with the federal unpaid tax liability (delinquent taxes) database. The state will send you a notice of the levy when all the following happens:
It is determined that you are receiving a state tax refund,
you live in a state involved in the SITLP Program
You have a delinquent federal tax account
Notice of Levy on Your State Tax Refund. You will receive this form from your state.
Notice of Your Right to Hearing after the levy.
After you receive the state’s levy notice, you will receive information from the IRS. You will be issued an IRS notice offering you the opportunity to appeal the levy. However, if you previously received an IRS levy notice mentioning your right to a hearing, you will not get a second notice.If you have any questions or concerns about the state refund tax levy program, you can call either 1-800-829-7650 or 1-800-829-3903 for help.
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Appealing An IRS Levy
If you dispute the tax levy, you do have rights during the IRS collection process. You will need to fill out and send the IRS Form 12153, Request for A Collection Due Process Hearing.
Requesting a collection due process hearing must be done within 30 days after receiving notice of a tax levy being served against your property. You will be filing your appeal with the Office of Appeals. Here is a sampling of some of the issues you may discuss at the Collection Due Process Hearing:
Your tax bill was paid in full prior to you receiving the IRS levy notice.
The IRS made a procedural error regarding your assessment.
You would like to discuss the collection options you have
The tax and levy notice were both assessed while you were in bankruptcy. (You are protected by the automatic stay while you are in bankruptcy).
The statute of limitations has expired. This means you received your IRS levy notice after the time allowed had expired.
You want to make a defense based on your marital status.
You did not have enough time (nor the opportunity) to dispute the assessed liability.
You need to mail the form requesting a collection due process hearing to the IRS address that is printed on your levy notice.
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Notice Of Levy
The last step in the IRS enforced collection process involves a levy. If you have ignored all attempts by the IRS to either negotiate repayment or paid your unpaid tax bill in full, the IRS will slap you with a Notice of Levy.
This notice allows the IRS to legally take all or any of your personal and real property in order to satisfy your unpaid tax bill. In addition to currently owned property, the levy notice will apply to any future interest you may receive in property.
Any property you have that was previously subjected to a tax lien, will not have a tax levy. (One piece of property cannot have two liens placed on it). This entire process could have been negated if only you would have contacted the IRS willingly.
