IRS Tax Levy: What It Is and How To Get Exemptions?
Tax levies put your assets at risk. To remove them, you need to work with the IRS to pay your back taxes. A tax levy is a serious business if you owe back taxes.
Here’s how a tax levy can affect you, and how you can remove the IRS levy.
What Is An IRS Tax Levy?
A tax levy is the seizure of property to pay taxes owed. Tax levies can include penalties including garnishing wages, seizing assets and bank accounts. Tax levies show up after you have gotten a tax lien. It is a claim the government makes on the property, when passed due on the income taxes.
What To Know About IRS Levy Exemptions?
Pay The Tax Bill
Sounds obvious, but in most cases paying back taxes is the only way to stop the tax levy. The most important thing is to cooperate with the collection action. If they ask for something, you give it to them.
Get On IRS Payment Plan
Your tax balance will accrue interest and penalties until it’s paid off, but if you allow the IRS to take three consecutive payments, you may convince the IRS to withdraw the lien from public record.
Ask For Offer In Compromise
It is a request to settle your back taxes for less than the full amount you owe. Beware: the IRS accepts fewer than half of the applications it gets in a year. You also won’t be considered if you are in bankruptcy or being audited.
File An Appeal
You have 30 days from the time the IRS notifies you of its intent to levy an asset to make a formal appeal. This appeal temporarily stops the IRS levy from being enacted until a decision is made on the tax situation.
Now, to file a formal appeal, you need to complete and submit IRS form 9423 that can be found on IRS.gov.
Appealing a levy may be a relatively straightforward process. However, it is no guarantee that the IRS will reverse its decision to levy the assets.
Request Installment Agreement
When the levy your assets, it will not relinquish its claim until tax debt is satisfied.
Rather than wait for months or years before it happens, you could have the IRS levy release fast by requesting an installment agreement with which to pay off the debt.
How Can Tax Levy Affect You?
Your paycheck shrinks- wage garnishment is common tactic. It means your employer must fork over a portion of the earnings each payday.
Your bank accounts are frozen- bank accounts are prime targets for recouping back taxes. Usually, the IRS contacts the bank and places a 21 day hold on the account.
Can You Reverse Tax Levy?
The IRS is required to provide a legal notice stating the time gap the taxpayer has for arranging the funds, reversing a tax levy, and securing assets once again.
However, it is harder for levied assets to be returned than it is to avoid levy before it takes place. The IRS only reverse a levy if:
- The IRS levy was made before a taxpayer was given 30 days to request a hearing.
- The IRS didn’t follow procedures
- The seized property is needed to earn income, thus helping the taxpayer pay the debt.
Finally, these methods are available to you when you want to have a tax levy against the property released. These are designed to help avoid having the assets sold off in order to settle the IRS debt.
Related Article: Dealing with Tax Problems- IRS Problem and Solution
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