Understanding IRS Tax Levies: How to Protect Your Assets

An IRS tax levy can be one of the most alarming financial situations for any taxpayer. Unlike a tax lien, which is a claim against your property, a levy allows the IRS to seize your assets to satisfy your tax debt. The IRS has broad authority when it comes to collecting unpaid taxes, and if you’ve received a levy notice, it’s essential to act quickly to protect your assets.

In this blog, we’ll break down what a tax levy is, how it differs from a tax lien, the types of assets the IRS can seize, and what actions you can take to stop a levy or negotiate terms with the IRS.

What Is an IRS Tax Levy?

A tax levy is a legal action that allows the IRS to seize your assets to cover unpaid taxes. It’s the final step in the IRS’s collection process after they’ve sent multiple notices about your outstanding tax debt. If you haven’t taken action to resolve your tax issues by paying the debt or negotiating a payment plan, the IRS can use a levy to claim your property or income.

Tax Levy vs. Tax Lien: What’s the Difference?

It’s important to understand the distinction between a tax levy and a tax lien:

• Tax Lien: A tax lien is a claim the IRS makes against your property when you owe taxes. It doesn’t mean the IRS takes your property immediately, but it prevents you from selling or refinancing your assets until the debt is paid.
• Tax Levy: A levy, on the other hand, is when the IRS actually seizes your property, wages, or bank accounts to settle your tax debt. The IRS can levy your wages (a wage garnishment), your bank accounts, or other personal property, and they can also seize and sell real estate and other valuables to collect the debt.

Types of Assets the IRS Can Seize

The IRS has the power to levy several types of assets, which can include:

1. Wages and Salaries: The IRS can garnish your wages, taking a portion of your paycheck to apply toward your unpaid taxes.
2. Bank Accounts: The IRS can seize the funds in your bank account, leaving you with limited or no access to your money.
3. Social Security Benefits: Yes, even your Social Security income can be levied if you owe back taxes.
4. Real Estate: The IRS can seize your home or other property, though this is usually a last resort after all other collection methods have been exhausted.
5. Vehicles and Personal Property: The IRS can take your car, boat, or other valuable personal property to satisfy your tax debt.

Steps to Take If You Receive a Levy Notice

Receiving a levy notice from the IRS can be overwhelming, but there are steps you can take to protect your assets and resolve the situation:

1. Don’t Ignore the Notice

The most important thing is not to ignore the levy notice. The IRS provides a 30-day window before taking action, so it’s critical to use this time wisely.

2. Seek Professional Help

Dealing with a tax levy on your own can be complicated and stressful. Hiring a tax professional—such as an Enrolled Agent or tax attorney—can make a huge difference. They can communicate with the IRS on your behalf, explore resolution options, and help you negotiate terms to stop the levy.

3. Request a Collection Due Process (CDP) Hearing

When you receive a levy notice, you have the right to request a Collection Due Process (CDP) hearing within 30 days. This hearing allows you to dispute the levy and explore alternative payment arrangements like an installment agreement or an Offer in Compromise.

4. Set Up an Installment Agreement

If you can’t pay your full tax debt immediately, setting up an installment agreement with the IRS can stop the levy and allow you to make manageable monthly payments over time.

5. Offer in Compromise (OIC)

An Offer in Compromise allows you to settle your tax debt for less than the full amount owed if paying the full amount would create financial hardship. A tax professional can help you determine if you qualify for this option and assist in filing the necessary forms.

6. Prove Financial Hardship

If paying the tax debt would cause significant financial hardship, you may be able to stop the levy by proving your situation to the IRS. A tax professional can assist you in compiling the necessary documentation to demonstrate that the levy would severely impact your ability to cover essential living expenses.

How a Tax Professional Can Help

Navigating the IRS’s collection process is complex, and dealing with a tax levy requires swift and accurate action. A tax professional can provide the following benefits:

• Expert Knowledge: Tax professionals are well-versed in IRS rules and procedures, helping you find the best resolution for your situation.
• Negotiation Skills: They can communicate with the IRS on your behalf and negotiate installment agreements, Offers in Compromise, or other arrangements that can stop the levy and protect your assets.
• Stress Relief: Facing a levy can be emotionally and financially stressful. Having a professional advocate on your side can relieve some of the pressure and ensure your rights are protected.

Conclusion

If you’ve received a levy notice, time is of the essence. Understanding what a tax levy is and how to protect your assets can make a significant difference in resolving your tax issues. Hiring a tax professional to navigate this process on your behalf can provide you with the guidance and peace of mind needed to address your tax debt and avoid severe financial consequences.

At My Tax Problems Solved, we specialize in tax resolution services, including helping clients stop levies and negotiate with the IRS. Contact us today to discuss your situation and find the best path forward.

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Disclaimer:

This blog post is intended for informational purposes only and should not be considered professional tax or financial advice. For personalized guidance regarding your tax situation, it is recommended to consult with a qualified tax professional.