What is Levy?
Typically, a levy is a process of seizing the taxpayer’s property to settle any tax debt. A levy is different to that of a lien where a claim is used as security for tax debt. IRS may levy property as a security to settle tax debt.
When the IRS puts a Levy against the Taxpayer?
- The IRS will issue a levy if the following things occur –
- The IRS sends you a Notice and Demand for Payment
- The taxpayer has neglected or refused to pay the tax
- The taxpayer received a Final Notice of Intent to Levy and Notice of the taxpayer’s Right to A Hearing (levy notice) at least 30 days before the levy.
How does the IRS settle a Levy?
In case, the taxpayer does not pay the taxes or make any payment arrangements; the IRS might seize and sell the taxpayer’s property. For instance – the IRS could seize and sell the properties like a car, house, boat, etc. The IRS could levy the property that is held by someone else, even though the property belongs to the taxpayer (like wages, retirement accounts, bank accounts, dividends, licenses, rental income, accounts receivables, the cash loan value of the life insurance or commissions).
Is it possible to have a Levy lifted?
- Yes! It is possible to have a levy lifted only if the following things occur –
- The taxpayer files for bankruptcy.
- The taxpayer enters into, and IRS approves a payment plan schedule (at this point, the levy might be lifted partially).
- The taxpayer submits an offer and compromise.
- The exact time of collecting the tax (usually, ten years after the date of assessment)
- The debt is satisfied (paid in full).
If you are about to be or already garnished, what should you do?
A taxpayer can handle this matter on his or her own. However, it will be a time-consuming affair and at times, it can be confusing. Therefore, it would be better to consult with a tax professional regarding ongoing tax issues.