If you’re dealing with tax issues, you may have heard the term “tax levy” mentioned as one of the possible actions the IRS can take to collect unpaid taxes. But what exactly is a tax levy, and what types should you be aware of? Let’s walk through the basics so you’ll know what to expect and, more importantly, how to protect yourself.
What Is a Tax Levy?
A tax levy is a legal action that allows the IRS or state tax authority to seize your assets if you have an outstanding tax debt. Unlike a lien, which is a claim on your property, a levy actually takes property or assets to satisfy the debt. Tax levies are serious, but you have options, and you don’t have to face them alone.
Types of Tax Levies
The IRS has several methods at its disposal to collect taxes, depending on your financial situation and assets. Here are the main types:
1. Bank Account Levy
A bank levy is one of the more immediate ways the IRS can collect back taxes. Once they contact your bank, they’ll freeze the funds in your account for 21 days. This freeze is a waiting period that gives you a short window to negotiate or dispute the levy. If the issue isn’t resolved, the funds will be transferred to the IRS to cover your tax debt.
What to Know: If a bank levy has been issued, it’s critical to act quickly. You may be able to work with the IRS to lift the levy, especially if it would create severe financial hardship.
2. Wage Garnishment
With wage garnishment, the IRS doesn’t take money from your bank account directly but instead works with your employer to deduct a portion of your paycheck. The IRS will keep collecting from each paycheck until the debt is fully paid or until you’ve worked out an alternative arrangement.
What to Know: Wage garnishment can impact your ability to cover basic living expenses. Fortunately, there are ways to negotiate with the IRS to reduce or eliminate garnishments, especially if the levy is causing significant hardship.
3. Property Levy
A property levy allows the IRS to seize physical assets like your car, home, or other valuable property. This type of levy can be especially disruptive, as it could mean the loss of assets you rely on for daily life or financial security. In the case of real estate, a property levy can result in a tax sale, where your property is sold to pay your debt.
What to Know: Property levies are rare and usually happen only if the IRS has tried other collection methods first. However, if you’re facing a property levy, you may still be able to arrange a payment plan or settle your debt before the seizure occurs.
4. Social Security Levy
For individuals receiving Social Security, the IRS can levy up to 15% of your Social Security benefits. This can be particularly concerning for those on a fixed income, as even a small deduction can impact monthly budgets significantly.
What to Know: Social Security levies are generally issued when other forms of income are not available. However, if you’re struggling, you may qualify for hardship relief. An experienced tax professional can help you understand your rights and options.
How Top Tax Defenders Can Help
If you’re facing a tax levy, you don’t have to navigate it alone. At Top Tax Defenders, our team of experienced tax attorneys understands the nuances of tax levies and can help you explore options like installment agreements, offers in compromise, or even temporary relief from collections. Remember, facing a tax levy is challenging, but you have resources and people who want to help.
Get in touch with Top Tax Defenders today to discuss your options. We’ll work with you to find a solution that works, so you can move forward with confidence.
