If you owe the IRS money and fail to pay your taxes, you could trigger what is called an “IRS tax levy”. A levy by the IRS permits the legal seizure of your property in order to satisfy an outstanding tax debt. This gives them permission to seize assets and convert them to cash. This includes real estate, vehicles, your bank account, as well as other assets.
Most Common Types Of IRS Levies and Garnishments
Before the IRS can commence the asset seizure process, they must provide you with a “final notice of intent to levy”. Once received, you are given 30 days to respond to and dispute this notice. If you’ve received a “final notice of intent to levy” from the IRS, it is time to take action.
If you fail to provide a response or confront the situation, below are some of the options the IRS maintains:
Bank Account Levies – One of the most feared, as the IRS can freeze and withdraw money from your account in order to satisfy the existing debt.
Property Seizure – The IRS can assess the value of existing assets and seize an amount that would be equal to debts owed. Typically this is a last resort reserved for the most “uncooperative” debtors.
Wage Garnishments – (Most Common) – The IRS issues a notice to your employer instructing them to initiate a tax levy on each of your paychecks with pre-determined deductions made until your debt with the IRS is satisfied.
Social Security Garnishment – The IRS can garnish up to 15% of your social security wages until your debt is satisfied.
With all of these options on the table, it is no surprise that many clients opt to apply for an “Offer in Compromise”.
How can I prevent an IRS Levy?
You can prevent an IRS levy by preventing the situation to begin with, or by making separate arrangements with the IRS. One example of an arrangement would be through programs like an “Offer in Compromise”, which many clients choose to come to us to assist them with.
Below are some of the arrangements that could be made:
- Pay all taxes owed in full
- Request an installment/payment agreement with the IRS
- Prove Hardship status
- Request a business installment agreement
What does the IRS consider financial hardship?
According to the IRS, “An economic hardship occurs when we have determined the levy prevents you from meeting basic, reasonable living expenses. In order for the IRS to determine if a levy is causing hardship, the IRS will usually need you to provide financial information so be prepared to provide it when you call.”
This will have to be proven through past returns, income statements, employment status, and other relevant documentation.
If you find yourself in this situation, the best thing to do would be to reach out to a trusted advisor to help you along the journey. Thankfully, we do just that!
Book a free consultation with one of our experts and start your journey towards a settlement today!