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What is a Tax Levy?

A Tax Levy is a form of legal seizure in which government law enforcement forcibly takes property due to a violation of the law. 

It occurs when taxes are not filed and/or unpaid, the IRS has the authority to take action to collect any liability owed to them by a taxpayer. 

What Can the IRS Withhold with a Tax Levy?

Within its authority, the IRS can do everything from:

  • Filing a substitute return for an individual
  • Withholding any future refunds, withdrawing, and freezing financial accounts under the tax owed individual. 
  • Applying a levy against you. 
  • Seize property, such as homes, cars, and other items of high value
  • Withdraw any available money from your financial accounts

What is a Tax Levy?

What Happens After the Property is Seized?

Once the property is sold at auction or other means, the funds are applied to the individual’s tax liability. The remainder is billed to the individual and responsible for any leftover liability.

Does the IRS Give Warnings?

Before the IRS can place a levy on a taxpayer, other attempts to collect money for the tax bill will be taken. Usually, a Notice and Demand for Payment is sent to the individual, which states the amount owed and payment date. The IRS will send a Final Notice of Intent to Levy (must be sent to you at least 30 days before the levy is applied) if one neglects this notice or pay tax bills. Additionally, the IRS will send a Notice of Your Right to a Hearing (often sent by certified mail but can also be delivered in person at the individual’s residence or work). Keep in mind, that if the IRS places a levy on your state tax refund, you may receive the Notice of Levy on Your State Refund and the Notice of Your Right to a Hearing after the levy is in place.

Is it Possible to Avoid a Levy?

Yes. Filing tax returns on time and taking care of any back taxes can help decrease the chances of receiving levies. Instead of ignoring tax bills, one should contact the IRS immediately to resolve any foreseeable issues about the liability. It may be possible to set up a payment plan, get an extension, settle for less than you owe, or apply to have your entire tax liability forgiven.

What Happens If Taxes are Not Paid After Being Contacted by the IRS? 

Failure to pay taxes may result in additional collection processes set forth by the IRS. This includes having a levy placed against you in an attempt to seize property and money from your financial accounts. One should not ignore a final notice even if they believe they do not owe the money. 

What to Do if Contacted by the IRS? 

The best thing to do is to contact the IRS or a tax resolution company to see what options are available and avoid potential levies from being finalized. 

Contact Us!

Please don’t hesitate to contact Coast One Tax resolution experts with any questions about your tax problems at 800-901-0885.