An IRS tax levy really is a last resort collection mechanism used by the IRS. Before the IRS begins to levy there should be fair warning to the taxpayer and the levy should not be a surprise. The IRS offers up many different mechanisms to the taxpayer to get back into compliance with the IRS and if the taxpayer fails to use any of these mechanisms the IRS will continue to get harsher and harsher until it finally begins to levy.
When the IRS will Levy
The IRS claims that they will typically only levy after 3 basic requirements are met. These are the 3 requirements they state:
- Demanded Payment: They assessed you with a tax amount owed through a letter that was sent to last known address
- You Didn’t Pay: After receiving the notice, you did not pay the tax amount owed
- IRS Sent “Final Notice of Intent to Levy and Notice of Your Right to A Hearing”: This notice will tell you that they have the intent to levy in 30 days if you do not pay or work with the IRS on some other type of settlement
How the IRS Will Levy
The IRS mainly uses three forms of levy. The levy choice they use will be the one that requires the least amount of effort on their part to collect the taxes owed. Below are the three forms of levy the use.
- IRS Bank Levy: An IRS bank levy is the easiest way for the IRS to seize money from a taxpayer. If the IRS finds that the taxpayer has funds in their bank account, it is likely that they will use this method of levy. With a bank levy the IRS will contact your bank and require them to put an immediate freeze on your bank account. Once the account is frozen, the owner will not be able to withdraw any funds. The account will remain frozen for 21 days until they seize the funds that are in the bank account.
- IRS Wage Garnishment: Wage garnishment is a form of levy in which the IRS will contact the taxpayer’s employer and require them to withhold a certain amount of money from each pay check in order to pay the taxes that are owed. The employer is required to do this or the employer will be held directly responsible for the amount of money that should have been collected.
- Asset Seizure: This is the least preferred method to be used by the IRS, but they will use it if they see no other option. The IRS can legally seize just about any asset you own (there are a few things off limits though). Examples of stuff the IRS can seize are houses, boats, cars, and any other asset that they think they can sell and get some value out of.
A tax levy should not be taken lightly. The IRS will get their money in one way or another. The best thing you can do is to work with the IRS on a solution that works for you financially. The IRS makes sure that they have solutions they can offer taxpayers with a wide variety of financial situations. They even have solutions for those taxpayers that have no money and will likely have no money in the future. If you are in serious trouble with the IRS, just work with them and find a resolution. The IRS is more accommodating than most people realize.