IRS Levy
If you fail to pay taxes owed to the federal government, you risk the wrath of the IRS. The IRS levy is the primary tool of tax nightmares and has given the IRS its nasty reputation.
IRS Levy
Taxpayers are often confused when it comes to an IRS lien versus an IRS levy. An IRS lien is a tax lien filed against various pieces of your property to secure a tax debt. With a lien, the IRS cannot actually seize the property. Once the IRS determines the tax lien isn’t going to motivate you to pay the taxes due, it can move to the much feared IRS levy tool.
You were up late one night and saw an infomercial telling offering to tell you how to buy assets seized by the IRS for pennies on the dollar. You probably thought to yourself that you were glad it wasn’t your car, home, boat, etc. Well, it could be if an IRS levy is filed against you. If one is filed, you can expect more to come as well.
An IRS levy is a tool for seizing your property to pay off overdue taxes. Unlike a lien, a levy isn’t registered per se on the title to the property. Instead, the levy immediately freezes your title to the property and gives the IRS ownership for all intensive purposes. Obviously, this is a complete nightmare for a taxpayer.
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The first IRS levy you will see if delinquent on taxes is a bank account levy. The IRS will serve the levy on your bank. The bank immediately freezes your bank account and you are legally barred from taking even one penny out. Instead, the bank totals the account for the day and then sends all of the money to the IRS within 21 days. The only way you might survive a bank levy is if you have more money in the account than you owe in taxes. Even so, you are going to be one unhappy camper.
An IRS levy is not restricted to bank accounts. The IRS can go after practically anything including homes, cars, cash value of insurance policies, accounts receivable, retirement benefits and so on. Even if the IRS has no right to file a levy on the particular asset, the agency is known for doing it anyway. You owe Uncle Sam money and the IRS will do what it takes to get it.
An IRS levy can be terrifying, but you will see it coming before it happens. Before hitting you with a levy, the IRS must assess taxes owed, send you a notice of the amount and demand to pay within ten days, wait for the due date to pass and then send you a final notice. If you blow through all of these warnings, you are making a huge mistake.
If you are hit with an IRS levy, you need to contact a tax professional immediately. One IRS levy is usually followed by more until the tax debt is paid in full. Then the audits start. A tax professional can negotiate with the IRS to minimize the pain and, perhaps, reduce or eliminate the debt.
Owing the IRS back taxes can result in no problems for a year or two. Eventually, however, the IRS will track you down, most likely at an inopportune time. Of course, there is never a good time to have your bank account sucked dry by an IRS levy.