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What are Tax Garnishment and Tax Levy?

Failure to pay your taxes can result in the garnishment of wages, money being removed from your bank accounts, and/or the seizure and sale of your vehicles, real estate, and other personal property. It is important to understand the difference between a tax levy and garnishment. Both are tools the IRS uses to collect tax liabilities from individuals who have failed to file their taxes or have fallen behind on their tax bills.

Difference Between Garnishment Vs. Levy

A garnishment is a collection tool where the IRS can instruct your employer to take a percentage or set dollar amount from your paychecks. Garnishments are generally no more than 25 percent of the disposable income.

A levy is what allows the IRS to withdraw money from a financial account. This is similar to having accounts and assets frozen. This allows them to withdraw any future deposits you make in the account until the liability is satisfied. An IRS levy also permits the legal seizure of property from a taxpayer to satisfy their tax liability. A levy does not mean you are exempt from paying the balance of your tax bill. Once the IRS collects everything they can, you will be billed for the remaining balance plus interest.

What Happens Before Levy Is Issued

The IRS has certain steps it must take before a levy is issued. It must assess the total amount owed and send you a notice demanding payment. If you neglect to pay or refuse to pay, the IRS must then send you a “Final Notice of Intent to Levy” at least 30 days before the levy is applied. This notice must be sent by certified or registered mail.

After You Receive Final Notice

If you receive an IRS bill titled “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” you may want to contact a tax professional for help and guidance through the process. Before the levy is applied, you do have some options to help stop the levy, future collection attempts, and wage garnishment. Look into setting up a payment plan or try to settle the tax liability for less than the original amount. A tax service company can help you determine which method is best for your situation and help you file all forms needed to prevent continued negative action from the IRS against you.

It may also be possible to stop a levy or garnishment if it will cause you financial hardship. This means if the levy will prevent you from being able to meet basic living expenses, you might be given an extension to take care of your tax bill. Financial information will need to be provided to see if you qualify.

How To Get Help

If the levy process has already been started, it is not too late. Talk to the IRS directly or get help from a tax resolution company specializing in tax situations similar to yours. You might be able to stop future levies and garnishments by either settling the balance or setting up a payment plan.

If you find yourself faced with a “Final Notice with Intent to Levy,” seek professional tax help right away. The tax resolution experts you work with can help you get through the process and possibly delay and/or stop levies tax problems and garnishment.