People are usually quite surprised when the government issues a tax levy on one of their accounts. A tax levy is a legal action that allows the IRS to legally take property in order to pay off a tax debt. As a result of IRS litigation and other actions, you could see your wages garnished, assets frozen, or even the seizure of your vehicles and real estate. This is not something that happens overnight though. The IRS must satisfy a number of requirements before can actually issue a levy. They must:
- send you a tax bill, and
- send a notice to levy if you refuse to pay.
The notice to levy must be either given in person or mailed to your business or home address.
If there is no arrangement to pay the delinquent taxes or set up another plan, the IRS then has the ability to levy. What happens next?
What Happens If I’m Threatened with a Tax Levy?
If you are facing an impending levy from the IRS, there are a couple of steps to take.
- Immediately Speak to the IRS: The most important step is to first make contact with the IRS and do your best to understand the situation. The IRS can issue a levy exemption if they deem that it is causing economic hardship. The levy can also be released if it was found to be in error. However, a release does not mean that someone is exempt from paying their taxes. It simply allows you to work with the IRS on a payment plan.
- Work Out a Payment Agreement: Those facing a levy can correspond with the IRS to fill out an Installment Agreement or Offer in Compromise. The Offer in Compromise allows a taxpayer to settle with the IRS for a lesser amount, and an Installment Agreement lets eligible taxpayers set up a payment plan with the IRS to avoid a levy.
- Request A Hearing With the IRS: After a Notice of Levy has been issued, a taxpayer has the option to set up a hearing with the IRS Office of Appeals by filling out the Request for a Collection Due Process of Equivalent Hearing form, and then mailing the document to the IRS.
- Speak with A Tax Professional: An experienced tax professional will be an invaluable resource if there is a threat of levy. They will be able to give advice about the risk of IRS action and even potentially help stop a levy from being issued in certain situations.
How Can I Avoid a Tax Levy?
Levies are avoided by filing returns and paying taxes on time. If you need more time, working with the IRS to file an extension is the next step to take. Even if you are unable to pay off all of the year’s tax obligation, the IRS is willing to discuss a payment plan for the remaining balance. Staying proactive and corresponding with the IRS is the best way to avoid a levy.
If you have been threatened with IRS litigation, a tax levy or other action, schedule a consult with taxation attorney Stephen Thienel today. Mr. Thienel has decades of experience assisting clients in business taxation and tax planning and preparation, IRS litigation, and tax compliance for individuals and businesses. Thienel Law, LLC serves clients in Maryland, Virginia, and the District of Columbia.