At ETS Tax Relief, we get plenty of calls with concerns about the IRS levy and the IRS sending taxpayers to jail. Typically, falling behind on tax debt does not mean the IRS is coming to put you in jail. However, the IRS is one of the longest reaching arms of the law. While they won’t necessarily put you in jail, they will levy your property.
What is an IRS Levy?
One of the harshest tools in the IRS toolbox is the IRS levy. An IRS levy is a legal seizure of your property to satisfy a tax debt. A levy actually takes your money or assets. If you’ve received a levy notice, you need to act quickly.
Common targets of an IRS levy include:
- Wages and salary (wage garnishment)
- Bank accounts (funds frozen and withdrawn)
- Social Security benefits (partial withholding)
- Retirement accounts (Military people, this includes disability payments)
- Real estate and vehicles (seizure and sale)
IRS Levy Timeline
An IRS levy does not happen out of the blue. There is a step-by-step procedure that the IRS must follow before taking your property. It looks something like this:
- Tax assessed – You file your tax return with a balance due. The IRS must assess your tax balance from the return. Tax debt can also result from an audit. However it comes, there is tax that is assessed (or added to the books).
- Bill sent – When there is tax debt, the first thing you’ll receive is a bill. It’s called a “Notice and Demand for Payment”. The bill typically provides a date by which you need to pay the balance.
- Failure to pay – If you ignore the bill, the IRS will send another. If you continue ignoring the bill, the IRS will send collection notices.
- Collections process – The IRS will start sending the CP500 letters. First is the CP501- Balance due notice. If you continue to ignore the letters, you will eventually receive a CP504 – Final Notice of Intent to Levy. The CP504 is equivalent to mom counting to three for you to behave before she pulls the car over.
- Final Notice of Intent to Levy (Letter 1058 or LT11) – The IRS must give you this final notice at least 30 days before seizing property. You have worn out the IRS’s patience, and they must take more action. This is your chance to request a Collection Due Process (CDP) hearing.
- Levy begins – If you don’t act, the IRS can garnish wages, empty bank accounts, or seize assets.
How to Stop or Release an IRS Levy
If you act quickly, you may be able to stop a levy before it begins, or get it released once in place. Options include:
- Paying the tax debt in full – while that is unrealistic for most people, this is the most effective option.
- Setting up an Installment Agreement (monthly payment plan)
- Submitting an Offer in Compromise (OIC) (settle for less than owed)
- Requesting Currently Not Collectible (CNC) status (if you can’t pay)
- Appealing through a Collection Due Process hearing
When you choose a collection alternative such as OIC or CNC status, you must be able to demonstrate an inability to pay the debt.
If you’re married or divorced, and you don’t believe this tax debt is yours to pay, check out our series on Innocent Spouse Relief.
If you’ve received a Final Notice of Intent to Levy, you only have 30 days to act. Ignoring the notice almost always leads to seizure of wages, bank funds, or property.
LuSundra Everett, EA is The Home Biz Tax Lady. She is a tax expert located in Chester, VA who will find the right solution for you! As an Enrolled Agent licensed through the Internal Revenue Service, LuSundra is authorized to represent taxpayers in all 50 states against the IRS and your state!
Through her work with ETS Tax Relief, she helps high income non-filers and small-business owners face the IRS with confidence, clarity, and a plan.
When you’re dealing with IRS letters, tax debt, or business tax issues, the right representation makes all the difference. At ETS Tax Relief, we work with individuals and business owners across Virginia to resolve tax problems, prevent future issues, and restore peace of mind.
If you’re ready to put your tax troubles behind you, visit http://www.etstaxrelief.com to learn more about how we can help.
