Tax Levy Basics
Tax debts are among the most difficult debts to eliminate. Taxing authorities have more power over you than other creditors. An example of that power is the tax levy, where they can seize assets that you don’t even have possession of. The IRS can jump to the front of the line and get paid before other creditors.
With a tax levy, banks, employers, and others may be asked to pay the IRS instead of you. They’re legally obligated to do so, and they’ll end up in hot water if they don’t comply.
Other authorities, besides the IRS, may also use a tax levy.
Getting a Tax Levy
The IRS may use a tax levy if you owe money and do not reach any agreement with them. Once you pay the debt or agree to some resolution they may release the tax levy. They are required to notify you before levying assets, so you should have some warning. Make sure they know where to find you if you want to avoid any surprises.
Once assets are levied, you have little control over what happens. You should communicate with the IRS and work toward alternative solutions if you receive information regarding a levy.
The IRS prefers to pursue bank levies and other investments when possible. They know it’s easy to collect liquid cash quickly; they don’t have to deal with a lien on your home or settle for a portion of your pay each month.
Ending a Tax Levy
If you’re subject to a tax levy that you don’t agree with, you can discuss it with the IRS. Contact them as soon as possible after you’ve received notice of the levy and reviewed your position. Hire a tax attorney or tax advisor if you need legal help.
In some cases, you can have a levy released. However, a tax levy is usually the option of last-resort so you’ll need a strong case to successfully appeal (they’ve already assumed you’re not going to work with them). Be sure you contact them before any deadlines and organize all the documents they need to review your case.