What is an IRS Levy?
An IRS tax levy is a seizure of your assets to satisfy a tax debt. It is an intimidating, attention getting method to collect back taxes. Generally, the longer you or you business owes back taxes to the IRS, the higher risk you are for a levy.
Why is this happening?
In the beginning, you will receive a series of collection notices in the mail. After a certain amount of time, if you do not have an official resolution in place, the IRS will move on to more aggressive tactics, including issuing a tax levy.
What is the levy process?
If you are an employee, the IRS will attempt to levy your wages via wage garnishment. If you are self employed the IRS typically will attempt to levy your bank account first, but may file a receivables levy if you have one large account from whom you receive the majority of your income. Receivables levies are disastrous because they will prevent you from paying your employees!
When the IRS levies your bank account, the send a notice to your bank. When the bank receives the notice, it will immediately freeze the funds in the account and move them to an escrow account for the IRS. At the very least, the bank will withdraw the levied amount and prepare to send it to the IRS. The bank holds the funds for 21 days before sending the seized amount.
Your account receivables can also be levied, meaning the IRS demands that your receivables make payments to them first. We don’t need to tell you how alarming that can be to any business trying to stay afloat today.
At this point in the collection process, the IRS doesn’t care if you or your business survives or not. This aggressive technique is intended to get your attention and to force you to make a decision about what you’re going to do about your or your business’s tax debt.
What can I do?
Whether you’re facing the threat of a levy, or you’ve just found out that you are going to be levied, it’s important to think rationally, make a plan and act without haste. In this limited window of opportunity, a resolution can be negotiated that may allow you to get a portion or even all of the levied funds back. If a tax levy is already in place, and because every situation is so case-specific, choosing the best strategy can require a consultation with a tax professional.
If you haven’t been issued a levy but you know that it is a possibility, you should be thinking about what strategies are necessary to keep the tax levy from moving forward.
You need peace of mind. Resolving this issue should be a top priority. Time is limited and now that your account has reached the forced collection stage, you need professional guidance or you can spend years recovering from sneak attack bank and wage garnishments and trying to hide.
No one deserves the anxiety and frustration that these situations can produce. Making a mistake is one thing, but choosing to suffer for a lifetime is not a choice anyone should make.