While a lien from the IRS stakes a claim against your property to pay off an IRS debt, an IRS tax levy actually seizes the property in order to pay the tax debt. The following three things will happen before the IRS issues a IRS tax levy:
- The IRS will issue a tax bill.
- You fail to pay the bill.
- The IRS will notify you of the levy with a 30-day grace period.
A IRS tax levy levy can involve property, income, retirement monies, bank accounts or other funds. No matter what the IRS levies, the action will likely cause you hardship in at least one of the following seven ways.
- Bank Account Garnishment
The IRS seizes money in your bank account to satisfy your tax debt. It will continue to take money from your checking and/or savings account until the tax bill is paid.
- Diversion of Money You Planned to Use to Pay Bills
If you planned to use the money in an account to pay an upcoming bill, such as rent or your car payment, the funds will not be available. The IRS does not consider future financial hardships but only past financial hardships. This means that you must be in serious trouble – for instance, you’ve received an eviction notice, utility shut-off notice or similarly drastic alert – before it will stop the levy.
- Wage Garnishment
This is the most common type of IRS tax levy. The IRS might also take a certain percentage of your earnings every payday to go toward taxes. Your employer must comply with IRS directives or risk being found liable for the taxes themselves.
- Social Security Levy
Less frequently, the IRS will employ this method in order to collect monies owed to the agency. The IRS can garnish a maximum of 15 percent of your Social Security earnings through its automated system. The agency might even go in manually and seize your entire Social Security income.
- Property Seizure
While quite uncommon, the IRS will sometimes seize property, including personal assets, such as a vehicle, home or boat.
- Subjective Review of Your Case
The IRS looks at each person’s case individually. This means that the agency will make decisions based on its discretion. While most agents work hard and treat taxpayers respectfully, some do not, which could mean additional challenges for you.
- Business Hardships
If the IRS places an IRS tax levy on your business assets, you might not even be able to pay your employees. However, the IRS will likely provide you with enough funds to avoid this problem.
We understand the financial pressure that clients face when confronted by an IRS tax levy. Do you want to know what options you have and figure out the most strategic, efficient ways to obtain relief? Call our Denver office for a private and free consultation at 720-398-6088.