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What is an IRS levy?

What is an IRS levy?

An IRS levy is a legal sanction that gives the IRS the authority to collect your property or any money available in order to pay off your tax debts. An IRS levy can lead to the IRS auctioning or selling off your seized property(s) which can include your valuable items, cars, houses, pieces of real estate, etc. It can also lead to a direct diversion of your salary or any monetary deposit to your bank account to pay off any tax debt you owe the government. When a levy is issued, the IRS fully takes away the property or any valuables of the taxpayer to settle off the tax debt that the taxpayer owes to the IRS.


Taxpayers need to realize that the IRS’s right to levy a taxpayer is fully supported and backed up by the law in the internal revenue code (IRC). This law gives the needed authority to the IRS to be able to issue a levy against delinquent taxpayers to ensure the collection of tax debts. A property can only be exempted from levy if the IRC exempts that property.


It should be noted however that the IRS will not just levy an individual out of the blue or without notice. For an individual to get levied, several warnings must have been issued over a period of time by the IRS, and these notices of penalties must have been ignored by the taxpayer. Furthermore, previous notices would have been also sent to the taxpayer reminding him/her of the tax debt piling up and suggestions of possible payment methods or plans that can be subscribed to with the IRS. This must also have been ignored by the tax payer.

Finally, the IRS would have sent a notice declaring their intent to levy and also the notice informing you of your right as an American to a Fair hearing. Most times, a federal tax lien would have previously been issued giving the IRS a legal claim on the properties of the taxpayer with the intent to settle tax debt by the IRS. Only after all these warnings and notices, can the IRS finally issue a levy against a tax payer which leads to forceful and not willful payment of the outstanding tax debt.


When an IRS levy is issued, the IRS decides what to seize or take from the taxpayer that can fully cover for the payment of the tax debt owed. If the taxpayer has no valuable assets, the salary of the taxpayer can be directly withdrawn from the taxpayer’s bank account after the payment of salary and directly used to offset part or all of the tax debt owed until the debt is fully paid. The IRS can also levy properties of the delinquent taxpayer that is not particularly in their possession like retirement accounts, salaries, bank accounts, dividends, etc.


A taxpayer should always desist from ignoring important notices from the IRS and respond immediately notices are received. One can respond by either complying with the instructions given on the notice received or can call the IRS or contact them via their official website to start communication regarding how to settle whatever issue the notice outlined. Same as when a tax payer receives an IRS notice stating the intent to Levy and the right of the tax payer to a fair hearing. It is advisable to contact the IRS immediately after receiving this notice in order to discuss the possible next course of action that can help avoid finally getting levied by the IRS.


Apart from the tax payer receiving a notice of intent to levy, other key individuals involved in the financial chain of the tax payer being levied can also be contacted by the IRS. These individuals include; the employer of that tax payer, certain customers and vendors or other necessary third party entities. These third party individuals are also given a notice about the intent of the IRS to levy the accounts of a particular tax payer financially connected to them. When a third party receives such notice from the IRS,  it is advisable for them to comply fully and cooperate fully with the IRS and any other instructions given in the notice received.


Before the IRS can issue a levy to a tax payer, the IRS must have fulfilled the following requirements;

  1. The IRS must have sent the tax payer a notice containing necessary information about their tax debt and the notice should include a demand for payment of the debt owed.
  2. The tax payer must have ignored this notice of the IRS or refused to comply with given instructions stated on the notice before payment and demand for tax debt owed.
  3. The IRS must have sent the tax payer a final notice of the intent to levy and a notice of the right of the tax payer to a fair hearing at least 30 days prior to the time of the issuance of the levy.
  4. The IRS will send the tax payer a notice informing them of the intention to contact third parties to ensure the collection of the tax debt owed.


Avoiding a levy

A tax payer can avoid getting an IRS levy by:

  1. Constantly filing tax returns on time and as when required before the deadline for filing.
  2. Requesting for an extension for filing tax returns if the tax payer realizes that they would be unavailable to meet up with the set deadline of filling tax returns.
  3. The tax payer should pay any tax debt owed or work out an installment payment plan with the IRS for successful payment of tax.
  4. If unable to pay tax, the tax payer should consider speaking to the IRS about possible options available to him/her to help reduce the tax debt.
  5. The tax payer should always respond to notices or penalties front he IRS immediately by complying and not by contacting the IRS directly.


How do I get a levy released?

If a notice of intent to levy and your right to a Fair hearing has been sent ot you by the IRS, it is advisable to contact the IRS immediately to request a levy release. This request can be granted by the irs based on their consideration of your situation. If you have sufficient proof that the levy placed will lead to financial and economic hardship, the levy release may be approved. However, if the levy placed will not cause any financial difficulties for the taxpayer, the IRS may reject your request for a levy release. If a request for release is rejected, the taxpayer can appeal  the decision of the IRS and plead for reconsideration.

Certain situations that can lead to the approval of a request to release a levy include:

  1. The payment of the tax Debt by the tax payer
  2. The decision to release the levy will help the tax payer to be able to pay off the tax debt.
  3. The tax payer enters into an installment payment agreement with the IRS that disallows the levy issued.
  4. The levy placed will cause a financial and economic hardship for the tax payer. That is, the tax payer will be unable to meet his/her basic needs or necessary living expenses due to the levy placed by the IRS.
  5. The value or amount of the valuables or properties levied is higher than the tax debt owed by the delinquent tax payer.


However, it should be noted that a tax payer will still be required to pay his/her tax debt even if levy has been released on the property. The tax payer should either pay off the debt or enter into an installment payment plan with the IRS to ensure payment of debt.

Has a notice of a tax levy been issued to you? You do not have to worry; let the best team of tax professionals fight on your behalf. Call us today.

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Internet subscribers, users, and online readers are advised not to act upon this information without seeking the service of a professional accountant. Any U.S. federal tax advice contained in this website is not intended to be used for the purpose of avoiding penalties, of any kind, under U.S. federal tax laws.