When you owe unpaid taxes to the IRS, the IRS can issue an IRS bank levy against your bank account and an IRS wage levy on your wages. Either levy can limit your finances. Understanding the difference between the two can help you decide how to proceed.
When the IRS places a levy on a bank account, you have 21 days to contact the IRS. The 21-day period begins when you receive notice of the levy, usually by mail. Generally, the funds in the bank account are frozen when you receive notice of the levy.
If the IRS erroneously placed a levy on your accounts, they may be responsible for reimbursing any fees incurred. In these cases, you must have replied timely to all communications and not contributed to the miscommunication or error.
Often referred to as wage garnishment, wage levies occur when the IRS takes a portion of your paychecks to pay off your overdue taxes. Your number of dependents and other cost-of-living considerations will reduce how much of each paycheck the IRS directs towards repayment.
Once your employer is notified of the wage levy, you will have three days to file out Statement of Dependents and Filing Status. If you fail to fill out this form, your tax status for the purposes of the wage levy will be “married filing separately with no dependents.”
When you have multiple employers, the IRS may levy up to 100 percent of your income from one employer. Note that bonuses and other sources of income will be counted as part of your normal wages.
Experienced Tax Professionals Can Help
You have options after the IRS places a levy on your wages or bank account. You can set up a payment agreement. In certain circumstances, you may request the IRS release a levy. None of these options will reduce your tax liability, but they may offer you more repayment flexibility.
If you owe the IRS money, you need help. Contact the experienced professionals at the Highland Tax Group.