As with all legal repercussions, there is a process that the IRS implements when an individual does not pay their taxes and fails to file for bankruptcy in a timely manner. The next appropriate action – usually as a last resort – is implementing a tax levy.
A tax levy is a legal seizure of a taxpayer’s property to satisfy unpaid taxes. Please note that unlike a tax lien, a tax levy is not simply a claim on the assets but an actual confiscation. Unless the Internal Revenue Code (IRC) exempts the property, any assets that a taxpayer owns or has an interest in is eligible to be levied.
Tax Levy Types
The type of levy selected by the IRS depends on the taxpayer’s individual situation, although the assets that are most easily liquidated are usually seized first. Common forms of tax levies include:
- Wage Garnishment – The IRS may request that your employer deducts a certain amount from your paycheck until the tax debt has been satisfied. If a tax attorney proves your financial hardship, however, the wage garnishment amount can be lowered or eliminated.
- Property Seizure – This may include nearly any asset, including your car and home, to settle the tax debt.
- Bank Levy – The IRS may request that your bank deducts funds from your account. If the tax debt is not repaid the first time, they will repeat the process as more funds appear.
- 1099 Levy – While the IRS can seize 1099 payments currently owed to you, it has no claim on any future payments.
- Other Assets Seizure – This may include rental income, life insurance, retirement benefits, dividends, or any commissions.
- Passport Seizure – If you owe $50,000 or more, the IRS can request that your passport is revoked or denied altogether.
Tax Levy Process
Before the IRS can issue a tax levy, the following actions must take place:
- The IRS evaluated your tax debt and issued a Notice and Demand for Payment to you.
- You failed to pay the tax bill by the specified deadline.
- The IRS issued a Final Notice of Intent to Levy and Notice of Your Right to A Hearing 30 days prior to proceeding with the levy. The notice may be issued in person, at your current home or at your workplace, or sent to your last known place of residence.
Contact Sheppard Law Offices Today
Avoiding a levy requires swift action, and hence you are strongly encouraged to speak with a qualified tax attorney about your situation to determine the ideal course of action. Tax attorney Kenneth L. Sheppard, Jr. of Sheppard Law Offices is committed to negotiating arrangements that are best for you and not the Ohio taxation authorities.