A tax levy can be defined as a legal seizure of assets to satisfy a tax debt. A person is typically issued a tax levy if and when the IRS comes to the conclusion that they owe back taxes. In such an event, an IRS tax levy is issued to the individual, which allows the government to take possession of the asset and use it as payment toward the person’s unpaid taxes. Interest fees and additional penalties are also often applied toward the back taxes.
There are two kinds of IRS levy programs; the Federal Payment Levy Program and the State Income Tax Levy Program. Under a federal tax levy (FPLP), the IRS can levy money from federal payments that are received such as Social Security benefits or federal employee’s salaries. The SITLP program enables the IRS to levy individual state tax refunds only.
Tax Levy vs. Tax Lien
It’s pretty common for people to confuse a tax levy with a tax lien; however there is a significant difference that you need to be aware of. A tax levy is when the IRS takes legal measures to seize your property in order to satisfy your debt. On the other hand, a tax lien is basically a claim which is used as security for your tax debt. Here-in lies the major difference between the two; a tax levy authorizes the IRS to actually take your property.
When is a Tax Levy Enforced by the IRS?
The IRS has the legal power to enforce a tax levy when you fail to pay your taxes. Specifically, the IRS has the right to issue you a tax levy after the following steps have been taken place; they sent you a notice and demand for payment, you refused to comply by neglecting to pay the tax or they sent you a Final Notice of Intent to Levy and Notice of Your Rights to a Hearing, 30 days before implementing it.
So what happens if you aren’t able to pay your tax levy? If you find yourself in a situation where you can’t settle your tax debts, then the IRS comes in and takes some legal action. They seize or sell any type of personal or actual property that you own. Some of the assets that the IRS can seize or sell include the following:
- Possessions such as your home, car, RV or boat
- Third-party administered property such as wages, bank/retirement accounts, licenses, life insurance etc.
- Social Security benefits
- Federal and state employee salaries
- State tax refunds
Getting Tax Levy Help!
On a brighter note, you can receive IRS tax help by asking a government tax officer to review your case. You can also turn to the Office of Appeals by filing a request to your designated IRS officer. However, bear in mind that if you are going to appeal, you must do so within 30 days of receiving the IRS tax levy notice.
Your tax levy cannot be held indefinitely by the IRS. They can release a tax levy under certain conditions. Some of the special circumstances which may drive the IRS to release your levy include; when you pay the total tax, penalty and interest amount you owe, when the decree of limitations set fourth on your tax levy has expired, when you prove to the IRS that releasing the levy will actually help you to pay them back, or when you are going through financial difficulty as a result of the tax levy imposed upon you.