What Is a Tax Levy : Hopefully you never have to deal with a tax levy imposed by the IRS. Unfortunately, many people do have to face this reality every year. A tax levy is pretty simple to understand. This is a legal process in which your property is seized to satisfy tax debt. In other words, if you owe money to the IRS they can use the power of a tax levy to get it back by seizing your property. Don’t get a tax levy confused with a lien. A lien is used as security for debt, whereas a levy is the actual process in which your property is seized.
What types of properties are in the line of fire when it comes to a tax levy? If you do not pay your taxes or owe money, the IRS can come after pretty much anything that will allow them to get what you owe. This includes but is not limited to your house, boat, and/or car. Property that is held by a third party is also subject to a tax levy. This can include: your paycheck, bank accounts, retirement accounts, life insurance cash value, and rental income among others.
As you can see, a tax levy is very serious. If you owe money to the IRS you do not want to avoid this because you could end up facing a levy sooner or later. In this case, you do not really have a choice as to what is going on. All you know is that the IRS is going to take something from you to satisfy your debt. You would be much better off cooperating with the IRS so you are more or less working on your terms.
The tax levy is the final and harshest collection mechanism of the IRS. The reason why it is so harsh is so it will scare people into paying their taxes before a levy goes into effect. The IRS will send out a final notice of intent to levy 30 days before they take action. In the letter they give the taxpayer their writes and ways they can rectify their situation. The IRS states the taxpayer can either pay in full or settle in some other way. Most people don’t understand what settle in another way means. People can settle by entering into a payment agreement with the IRS, using an offer in compromise or appealing the levy.
Now that you know more about you can answer this question: am I in a position where I may face a levy in the near future? If so it is important to take action as soon as possible and even considering a tax professional to be on your side to either prevent the levy or remove the levy.