Let’s face it, the last government agency we want to hear from is the IRS. We work, pay our taxes, file our returns, and hope that’s the end of it. Sometimes we get into financial difficulties and are not able to pay the full amount of the taxes we owe. That’s when the letters from the IRS arrive. Let’s talk about one of the most notorious letters from the IRS— the Notification of a Tax Levy.
Frequently Asked Questions About Tax Levies
- What is a Tax Levy?
- Is There a Statute of Limitations on a Tax Liability?
- Can the IRS Take My Income Tax Refund?
- What is a Tax Levy on My Paycheck?
- What is a Tax Levy on My Bank Account?
- What is a Tax Levy on My Property?
- Can a Tax Levy be Released?
- Can a Tax Levy Affect My Credit Score?
- Hiring a Representative for IRS Issues
- Acadia Law Group Can Help
This article will help you better understand IRS tax levies and they can affect you and your property. If you’ve received a levy notice from the IRS, you may be wondering what a tax levy means, what will happen next, and most importantly— how you can resolve your IRS issues.
What is a Tax Levy?
When you owe money for unpaid back taxes, the IRS has the legal authority to seize your property, wages, and bank accounts to force repayment of the tax liability. Initially, the IRS will send a Notice and Demand for Payment. If you don’t contact the agency to plan a repayment installment agreement, or if you ignore their demands for payment, they will send out a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing. The Notice of Levy will be sent via certified or registered mail at least 30 days before the levy commences. This will give you time to contact the IRS and make arrangements to pay the tax levies or appeal their claim that you have unpaid taxes.
It’s vital that you take one of two actions when you’re first contacted by the IRS about unpaid or delinquent taxes. First, contact the IRS to discuss your tax debt and make arrangements for repayment. If you’re unable to resolve the matter, you may need to hire an attorney. A tax attorney helps protect you from overzealous persecution of unpaid taxes. They work with the IRS to settle your tax debt, make an offer in compromise, or file an appeal if you disagree with the tax bill sent to you. Whether you haven’t filed a tax return or don’t have the assets to pay your tax bill, you need a legal expert to help handle your unique situation with the IRS.
Is There a Statute of Limitations on a Tax Liability?
When the IRS audits your taxes, they usually review the last three years of tax returns. If there is a major error, the agency may audit additional years. The IRS has ten years after a tax return is filed to collect any tax debt. If your taxes are being audited, the IRS may ask you to extend the statute of limitations, ostensibly to give you more time to provide additional documentation supporting your claim or to appeal a finding that you owe taxes.
Can the IRS Take My Income Tax Refund?
Oh, yes, the IRS can take your federal income tax refund and more. A “continuous levy” can be instituted by the agency, and they can take any payments you receive from the federal government directly from your bank account. This includes federal pension payments, reimbursements or advance payments for travel made as a federal employee, military retirement, and civilian payments made to contractors and vendors to the government or those made to Medicare providers and suppliers. Even Social Security benefits can be levied, as well as state or city tax refunds, including the Alaska Permanent Fund Dividend.
Supplemental Security Income payments and workers compensation payments are usually exempt from an IRS levy or garnishment.
What is a Tax Levy on My Paycheck?
The IRS can levy (seize) all or a portion of your paycheck for repayment of past-due taxes. This IRS wage garnishment can be taken for one or more of your jobs or other income sources, such as child support or alimony. Part of your wages may be exempted from the wage levy and depends on the number of your allowed dependents. The IRS will send your employer the levy notice and your employer will have to give you a Statement of Dependents and Filing Status to complete. You only have three days to complete and return the form. Otherwise, the IRS will assume your filing status is married filing separately with no dependents.
Bonuses, fees, commissions, and other extra payments can be taken as well and there would be no exemptions for these payments.
What is a Tax Levy on My Bank Account?
The IRS grants you and your financial institution 21 days before freezing assets in your bank account. This provides you time to contact the agency and arrange a repayment plan or to notify them of an error in the bank levy. You’ll receive the levy notification in the mail, and delivery of the notice is considered the start date of the bank levy.
If there was an error in the levy and you’re charged a fee by your bank for processing the levy, the IRS may reimburse you for the fee.
Reimbursement depends on three conditions:
- The error must have been caused by the IRS.
- Your actions didn’t add to or compound the error.
- Prior to the levy, you were in contact with the IRS and cooperated in their information requests.
Any bank account where you are a signatory may be levied by the IRS, including those of your children and your parents. The IRS will release the levy on those accounts, but documentation must be provided that the account does not belong to you.
What is a Tax Levy on My Property?
The IRS can seize your personal property to pay off your unpaid tax debts. This is different than a tax lien. While the IRS can also place a federal tax lien on your property as security for unpaid taxes when a repayment plan is approved, a levy is actual seizure of the property. Any property you own that has value can be taken and sold to pay off your tax debt, including your primary home, your car, boats, RVs, and vacation homes.
After the IRS seizes your personal property, it will be sold at auction, and the proceeds will be applied to your tax debt. Prior to the auction, you will be given notice of the property to be sold, the minimum bid prices (you can challenge the assessed fair market value), and the date of the auction. The sale is also announced in local newspapers, usually with a 10-day notice. If more money is raised by the property sale than what you actually owe, the IRS will refund the difference.
Can a Tax Levy be Released?
Yes, the IRS can release a tax levy. If a tax levy causes a hardship, meaning you cannot meet basic, necessary living expenses, you can appeal to have the levy released. You should contact the IRS to explain your situation and how the levy is causing a hardship. Be prepared to support your claim with financial documentation. Of course, if the tax levy is released, you must still pay any outstanding tax debt balance. Tax levies may be reinstated if you do not fulfill promises you made to repay the debt.
Can a Tax Levy Affect My Credit Score?
Tax liens and levies will no longer affect credit scores, effective April 16, 2018. Tax liens are a matter of public record and the court filings by the IRS are also a matter of public record. Before 2018, IRS actions were collected by consumer reporting agencies and included in credit score calculations. As of April 16, 2018, however, the Consumer Financial Protection Bureau removed all tax lien information from consumer credit reports, so a tax levy or lien is no longer a factor when a credit score is calculated by any of the three credit reporting companies.
Hiring a Representative for IRS Issues
IRS regulations state that all taxpayers have the right to obtain a representative to deal with the IRS. Your representative should be an attorney in good standing who is authorized to practice law in the Federal Court presiding over IRS cases in your location. You can also choose to be represented by a licensed CPA, an agent authorized to represent claimants by the IRS, or even a family member. You can limit the access available to your representative and limit the issues your representative can have access to when you complete the Appointment of Representative form.
Acadia Law Group Can Help
The tax experts at Acadia Law Group are experienced in dealing with the IRS. We can negotiate a tax levy release, work with the IRS to reduce your tax bill, and arrange a payment plan that will eliminate many of your issues. Our tax attorneys can even file a lawsuit in federal court to prevent lien and levy actions taken by the IRS.
Contact Acadia Law Group today to learn more about tax debt relief. If you receive a levy notice from the IRS, don’t hesitate. We’ll help you avoid the stress and headaches of tax levies on your wages, bank accounts, and property. Call us toll free: (800) 653-4600, or email us at firstname.lastname@example.org.