How To Get Help With A Tax Levy
When you owe money to the IRS, it is hard to enjoy life. Being in debt is something nobody plans for, and being in debt to the IRS is especially difficult. The IRS enjoys what feels like unlimited power to collect debts.
Unlike other creditors like your mortgage lender or credit card company, the IRS has the power to take your wages, freeze your bank account, and in the worst cases imprison you. No other creditor has the same type of power and influence. Facing the IRS on your own can be intimidating, and if youre not prepared and know what youre doing, can end badly.
If you have received a notice from the IRS, time is not on your side. You need the right strategy to be successful and get your life back. Negotiating with the IRS requires a specific set of skills and expertise. Working with a tax resolution expert is the best way to ensure all of your options and rights are fully exercised.
How Can I Get My Tax Levy Released
There is a solution to this terrible problem. All of these solutions involve some sort of action on your part! Ignoring the problem is NOT a solution. An experienced tax levy lawyer can go through the options and find a solution that fits your case.
Here are a few ways to get a tax levy lifted:
- Pay the amount of your debt.
- The statutory period for collection expired before the levy was issued.
- Enter into an Installment Agreement.
- Submit an Offer in Compromise.
- Prove financial hardship. This means that the levy is causing you immediate economic difficulty to the extent that you are unable to afford basic living expenses.
Please remember that the release of a levy does not make your debt go away! Even if you get the levy lifted, you need a solution to your tax debt problem.
What Do You Use The Levies Money For
The funds collected are also used to cover administrative costs like management fees, bank charges and stationery, municipal costs including water, electricity, refuse collection and sewage, and insurance for the entire property but not for the contents of each unit.
You may be able to get the levy lifted by taking care of the obligation, making a payment arrangement, or settling the debt. Or, if you were never properly served with notice of the original lawsuit, you may be able to get the judgment vacated. An attorney can work with you to file the necessary court documents to have the judgment overturned.
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Why Am I Subject To A Tax Levy
Generally speaking, the IRS will only levy your assets after theyâve done the following:
What Happens When A Bank Levy Is Requested
Advance warning: Once your creditor makes the request, your bank will freeze your account and review the situation. Your bank might not notify you that a bank levy is in progressand creditors might not alert you either. A levy is a strategy creditors typically use only after they have given up on other ways to collect from you.
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How Much Will The Irs Garnish From My Wages
The IRS cant seize your entire paycheck. Some of your wages are exempt from garnishment and will still be paid to you each pay period. Your exempt wages are calculated based on the standard federal deduction and the number of dependents you were allowed the year being levied.
Before it begins garnishing your wages, the IRS will send your employer Publication 1494, which has tables for figuring out the amount of your wages or salary that is exempt from garnishment. For example, if your filing status is married filing jointly, the base exemption amount for 2021 is $482.69 each week, plus $82.69 for each dependent. That means if you are married with two dependents and file a joint return you can exempt $648.07 from garnishment each week.
Your employer should also provide you with a Statement of Dependents and Filing Status that you must complete and return within three days. If you fail to return the statement within that time the IRS will calculate your exemption as if you were married filing separately and have no dependents.
What Is The Difference Between A Lien Levy Warrant And A Garnishment
Liens are filed with the county Register of Deeds and/or the Secretary of State as security that a debt will be paid from proceeds when a taxpayer sells real or personal property.
Levies are a specialized form of warrant and are generally used to withdraw funds from a taxpayer’s financial institution account or garnish a taxpayer’s wages. Levies are generally used when a taxpayer has failed to resolve a debt through voluntary payment.
Warrants are used to close a taxpayer’s business and/or seize a taxpayer’s real or personal property other than a financial institution account or wages. Warrants are generally used when a taxpayer has failed to resolve their debt through voluntary payments and the debt is continuing to escalate.
Garnishments are court orders, legal procedures which the earnings or refund of an individual or entity are withheld for payment of a debt. Third-party creditors petition the court for garnishment of refund monies.
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Understanding An Irs Notice Of Levy
When you receive anIRS notice of levy, you are officially notified. The letter explains that the agency will begin collecting the debt by any means necessary.
Tax levies include harsh punishments like wage garnishment and property seizure. Consequently, such a notice from the IRS is not only disconcerting, but also extremely stressful. It means that you might not only lose out on wages, but that you might also have trouble accessing your bank accounts or lose a property to settle the debt.
At this point, it may feel like you are frozen in terms of your power and control over the situation. How do you cover bills when the IRS refuses to let you touch your bank account? How do you afford your mortgage if the IRS takes your business? What do you do when you want to sell items to help settle the debt, but the IRS has seized everything?
The most pressing issue is this: a taxpayer only has 30 days to resolve the debt before the levy actions become official. Receiving an IRS levy release is a delicate process in which its best not to fight the matter without professional help.
It is critical to take care of the tax debt before the 30-day grace period expires or request another type of action to temporarily settle the matter before your bank accounts and property get seized. Speaking with a qualified tax professional can make all the difference in the world.
Consequences Of Tax Levies
Back taxes are among the most difficult debts to eliminate. Bankruptcy doesnt even eliminate all of your taxes owed, which makes it complicated to get out of the dilemma. Furthermore, the federal government gives the IRS a lot of power when it comes to bringing down harsh punishments to collect a tax debt.
Tax liens and levies are the two most serious types of punishments that the IRS can hand out to individual taxpayers. While tax liens are a claim on your property and hamper your ability to take out new loans , tax levies are far more serious.
Tax levies provide the IRS the legal right to take your assets. With a tax levy, the IRS may:
- Freeze your bank accounts.
- Seize assets like cars and other vehicles that you own.
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How Can I Avoid A Tax
The best way to avoid tax-related wage garnishment is to stay on top of all required tax filings. Pay all amounts owed to the IRS and State . If you cannot afford to pay the IRS or State, contact a licensed tax professional for help. You can request one by calling our free tax consultation number above. Realize that the IRS and many states have tax options depending on your financial and tax situation. For example, payment plans, settlements, penalty reduction, and so forth.
The Differences Between Tax Lien Levy And Garnishment
by Gary M. Kaplan, C.P.A., P.A.| Comments Off on The Differences Between Tax Lien, Levy, and Garnishment
Back in 2009, the IRS reported that 8.2 million Americans owed the government $83 billion in unpaid taxes .
Falling behind on your taxes isnt as uncommon as you might think. Perhaps you underpaid and didnt have the money to pay the balance. Maybe you got too busy to file or correct your return, or a significant life event got in the way.
Regardless of what happened, the IRSs job is to collect federal income tax. And if you dont pay, it has tools at its disposal to collect. Those tools include an IRS tax lien, a tax levy, and wage garnishment.
What are the differences between these three processes? Keep reading to learn more about IRS collections and how to call a truce with the government.
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Irs Notice Of Intent To Levy
The Notice of Intent to Levy is the last notice you must receive before the IRS can seize your property. The notice will also inform you of your Collection Due Process rights, including the right to request a hearing.
What the Notice of Intent to Levy Means and How Long You Have to Respond
This notice is informing that your property is about to be seized by the IRS. The IRS can levy your bank account, wages, or other property and apply the funds to the back taxes you owe the IRS.
You have 30 days to request a CDP hearing in writing. The back taxes IRS wont levy your assets during these 30 days unless one of the following exceptions applies:
If you request a CDP hearing, you can try to avoid the levy by disputing the tax liability, proposing a collection alternative, or showing that the levy would cause financial hardship. The IRS wont proceed with the levy while the CDP hearing process is ongoing.
You also have the right to have the U.S. Tax Court review the determination made at the CDP hearing. If you dont request your CDP hearing within 30 days, you lose the opportunity to have the Tax Court review your case.
Types of Intent to Levy Notices
You may receive any of the following notices when the IRS is threatening to levy your property:
Each notice should state how much you owe and inform you that you have 30 days to request a CDP hearing.
What Is A State Tax Levy
Have you recently received a notice from the state about your tax debt? Maybe you are aware of the threat of a possible state tax levy? Lets examine what a state tax levy is, why you may be issued one, and what you can do to take care of it.
How state tax levies affect you
A state tax levy is very similar to that of an IRS levy. A state tax levy is the states way of forcibly seizing your assets. State tax levies can come in the form of a wage garnishment, bank account seizures, and property seizure.
Like the IRS, the state will notify you of your debt and begin a series of notices. State taxing authorities must follow a strict process of notifications before issuing a tax levy against you.
What triggers a state tax levy? What can you do?
State taxing authorities issue a tax levy when you owe back state taxes. If you choose to become proactive prior to having a levy assessed you can avoid the headache of getting a tax state levy released.
Whether youre facing the possibility of a state levy or trying to get one released, you need to have a firm strategy in place. Its never too late to form a proactive strategy when facing a tax levy. Working with a tax relief expert is the fastest way to resolving a state or federal tax levy issue.
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Can Irs Garnish Your Whole Check
Yes, the IRS can take your paycheck. Its called a wage levy/garnishment. The IRS can only take your paycheck if you have an overdue tax balance and the IRS has sent you a series of notices asking you to pay. If you dont respond to those notices, the IRS can eventually file federal tax liens and issue levies.
Assets That Are Exempt From Tax Levies
The IRS has the right to levy most assets, but some laws prohibit them from levying certain types of assets. The assets below are exempt from tax levies:
- Books, mainly those that are educational
- Undelivered mail
- Workmans compensation income
- Personal items with a total value of less than $6,250
- Business supplies: Items that are necessary for the taxpayer to generate income
- Unemployment benefits
- Income that is used to support children under the age of 18. Must be income that was court ordered to support the children, such as child support.
- A primary residence when the unpaid tax amount is considered small
- Public assistance payments that come from a government agency. Public assistance payments include things like welfare and SNAP food benefits.
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Example Of Tax Levies
Here are a few examples of how tax levies can inhibit your life and hurt your future:
- You owe taxes, and the IRS places a tax levy. You go to the bank to withdraw funds, and the bank notifies you that the IRS froze the account. Now you cant access any of your money.
- Every two weeks when you receive a paycheck, you get the usual deductions for Social Security and Medicare. Now, you also have a significant portion of your earnings held back because that money goes to the IRS to satisfy the debt. The leftover money may not be enough to pay your bills.
- The IRS seizes your property. You lose a home or car, and you will not recoup anything from the sale. All the proceeds go directly to the IRS to resolve back taxes.
The IRS has more power than creditors. Therefore, if you owe a substantial amount in back taxes, you should speak with a tax professional immediately before the IRS turns to tax liens or levies.
What Are Levies And Garnishments
If you fail to pay your debt, your creditor can take steps to force you to do so. Both a levy and a garnishment are collection tools that allow a creditor to take money from you and apply it to your account balance. Here are how they work:
- Levy. A levy allows a creditor to withdraw money from a financial accountmost commonly, a checking or savings account. If a creditor enacts a levy against you, it means the creditor freezes a financial account and then usually takes money in that account to cover your debt. The creditor then takes any future money that you deposit in the account until the creditor removes the levy .
- Garnishment. A garnishment is a collection tool that allows a creditor to instruct your employer to take a portion of your wages from your paycheck. The law then requires your employer send those earnings to the creditor so that the creditor may apply them towards your debt.
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What Is The Difference Between A Tax Levy And A Tax Lien
A tax lien is a claim made on your property and assets by the government when you owe tax debt over $10,000. This claim is used as a security for the debt that you owe.
Before a lien, you receive an official demand by the IRS to pay your tax. If you fail to pay, the claim will begin.
If you do not pay the tax debt you owe, a levy will begin.
Simply put, a tax levy is the exercise of the claim made by a tax lien, taking the claimed property and assets to fulfill your debt.
When Does Wage Garnishment Happen
Wage garnishment is a last-ditch effort employed by the IRS only when it exhausted other resources, and there are no other assets to consider.
As with liens and levies, you do get plenty of warning. If you fail to pay your taxes or initiate a payment plan, then you will receive a Final Notice of Intent to Levy as well as the Notice of Your Right to a Hearing. If you do not ask for a hearing or contact the IRS, wage garnishment begins 30 days after sending the letter.
It is a good idea to respond to these notices to stop the garnishment from occurring. Unlike other creditors, the IRS doesnt need a judges permission to garnish your wages. Moreover, the same laws that prevent other creditors from trimming more than 25 percent of your disposable income dont apply to the government.
The IRS can and potentially will leave you only with enough to pay your mortgage/rent and fixed expenses. If you have a complicated financial situation , you could be at risk of losing the money required to pay your bills.
Plus, the garnishment doesnt stop until you pay off your tax bill or you can prove undue hardship. However, even proving financial hardship doesnt eliminate your tax bill. You pay it sooner or later.
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