Not paying your taxes has serious consequences, and one of the most financially intrusive is the IRS levy. With a levy, the federal government seizes funds from your bank account, garnishes your income, or takes possession of physical assets you own. All of these “forced collection” actions are types of levies, and they are allowed under the US Internal Revenue Code after you receive proper notice.
IRS Notice of Intent to Levy
If you received a levy notice, there is only a short time period to take actions and prevent the levy from occurring. In this article, we’ll explain what a federal tax levy is and what you should do if you get a letter saying you have one coming.
Note, we always recommend getting in touch with a specialized Tax Resolution Professional to negotiate with the IRS on your behalf. If you’d like to schedule a no-cost confidential tax relief consultation contact us.
What is a Federal Tax Levy?
People often use the words “lien” and “levy” interchangeably, but they’re not the same thing. There are major differences in how these actions affect a taxpayer. A federal tax lien is the government’s legal claim of interest in all your property. They don’t sell off or forcefully confiscate the property, but it can definitely make your life a lot harder having the IRS put a chain on everything you own.
How IRS Tax Levies Work
A levy is much more financially intrusive and usually comes when you least expect it. A levy is the enforced collection of levied amount of tax by distraint, for example, by confiscating money directly out of a bank account or garnishing up to 75% of your net paycheck. Consider the severity of the government placing a chain on your property compared to their confiscating your paychecks and bank account balances, regardless if that leaves you in a stable financial situation.
Now you probably have a better understanding of how severe and crippling it is when the IRS comes to seize money directly from you.
How an IRS Tax Levy Affects Your Financial Well-being
In most cases a levy can be avoided, but you must take action – quickly.
Many people choose to ignore it and one day wake up to find their bank account balances are zero. Or, the net pay on your next paycheck is 75% less than the previous one and what you were expecting to net. It is much easier to fight for your rights if you still have your bank account money and all of your income than it is to start strategizing with a $0 or negative balance.
What Happens When The IRS Takes Money From My Bank Account?
When IRS bank levies occur, they don’t give you the courtesy of sourcing other income to cover the automatic withdrawals you have in place to cover your cost of living, and the fees and penalties associated with standard bank processes like overdrafts are just the cherry atop the most unwanted sundae you can imagine! If you get a bank levy notice from IRS, please do not put it off!
What About Bankruptcy?
Once you have an attorney file a bankruptcy, IRS is barred from levying against you as long as the bankruptcy case is open. However, all your tax debts or a portion of your tax debt may survive and continue after the bankruptcy, and you are once again fair game for the IRS to levy. You can’t outrun the IRS.
What Can You Do About IRS Levies?
The levy notice suggests paying the tax in full before a near dated deadline to avoid it. However, most people can’t take out their checkbook and pay the amount of the debt in full. That’s where a Tax Resolution Specialist can help with proven strategies that are feasible for your specific financial situation.
Get Help Stopping an IRS Bank Levy
Contrary to the IRS’s advice, your first course of action should be to call a qualified tax resolution professional like Tax Crisis Rescue. Dealing with the IRS yourself is like going to court without a lawyer. Sure you could do it, but your chances of having a favorable outcome are slim when going it alone against a behemoth like the IRS.
A qualified tax resolution professional can lay out a collection alternative, get on the phone with the IRS immediately on your behalf, and begin negotiations to relieve your tax problem. Assistance from a Certified Tax Resolution Specialist means you don’t ever have to speak to the IRS yourself.
IRS Payment Plans and Other Favorable Options
IRS Installment Agreements
The most common collection alternative is a monthly installment agreement which allows you to repay the debt in an orderly fashion with manageable monthly payments over up to 72 months. If we can show IRS that it would create a financial hardship to make the full monthly payment, they often will accept a lower payment amount.
Temporary Hardship Status
If you have very little income and no ability to borrow, then you can ask to be placed in temporary hardship status. While in hardship status, you are not required to pay anything on the delinquent IRS debt you owe. The debt continues to accrue penalty and interest. Once the financial hardship is over, you can use one of the other collection alternatives to address the delinquent tax debt.
Offer in Compromise
If the hardship status is permanent and you have very little income and assets, you may qualify for an offer in compromise. The offer in compromise allows you to settle the full amount of the outstanding tax debt for less than the total owed.
The offer amount depends on your personal “reasonable collection potential,” as determined by IRS guidelines depending on your income and equity in assets. The reasonable collection potential calculation attempts to estimate how much IRS could reasonably expect to recover from you if they pursued all forced collection actions available. If you voluntarily offer to pay the full amount they would collect by distraint, the IRS will consider accepting an offer in compromise from you.
Get Experienced Tax Levy Help You Deserve
Reach out and contact our firm in New Orleans Louisiana and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. https://taxcrisisrescue.com/contact-us/