The Basics of Federal Tax Levy
The IRS employs two primary methods in collecting tax debts from the taxpayers, wage levies and bank account levies. When the IRS enforces any of these on you, it means that your funds and other forms of income are in jeopardy.
When you incur tax debts, the IRS can levy your wages, including your retirement income, social security benefits and other bonuses that you may have earned. In fact, the IRS is the only entity that can garnish your paycheck without having to go to a trial. A simple notification from them obliges your employer to transfer a considerable amount of your paycheck to the IRS. Wage garnishment only terminates when the tax is paid off or until you receive a wage levy release.
In the case of independent contractors and the self-employed, the IRS can actually, in fact obligate the clients to pay a certain amount of money to them. Although some amount will still be received by the contractors, this is substantially less than the normal checks they receive. The IRS Publication 1494 contains all the answers to any questions regarding this matter.
The second method, a bank account levy, allows the IRS to take all the money in any of your bank accounts. Because this is a government order, the banks will abide by this notice and it would be useless to argue with them. Recognize, however, that the IRS can only take the funds that are in your bank account the day the levy is received. For example, if you deposit a check on Friday and the bank got a levy notice on Tuesday, only funds present on Tuesday will be given to the IRS. It is only when another levy is issued that funds in your account from Wednesday to Friday can be transferred to the IRS.
The law grants you with up to 21 days to convince the IRS to release the bank account levy. If you cannot get one within this prescribed period, the bank will immediately send your funds to the IRS. Ideally, the amount that should be transferred to the IRS should be the same as the amount owed, but if succeeding tax levies are issued, then larger sums of money maybe collected.
The government may employ other less used but equally effective collection methods aside from a wage or bank account levy. The IRS can also levy personal assets like jewelry, your home, collectables, boat, insurance policies, ATVs, account receivables and even airplanes should situations call for it. With this, it is important to take note that any tax levy would indicate an IRS problem that simply does not go away unless dealt with squarely.
As clearly pointed out in this write-up, a Federal tax levy is a serious issue in all respects. Thus, before the government imposes more serious collection methods, the likes of tax levies, taxpayers owing the IRS amounts of money must settle these dues now.
Filed under Blog by on Nov 1st, 2009. 