If you are behind on your taxes, the IRS may decide to collect the debt through a levy. A levy allows the IRS to legally seize property or assets in order to satisfy the amount owed. This can include financial accounts, wages, bonuses and other assets you might hold.
Tax debt can quickly become a problem after an IRS audit determination, a finding of unreported income, failure to file penalties or other tax controversies.
If you have not challenged the debt or otherwise worked to resolve the issue with the IRS, the agency can initiate collection proceedings through a levy. Before wages can be garnished, the IRS must follow a series of required steps. If you are seeking a clear explanation of the full process right now, download the firm's "Guide to Understanding IRS Wage Garnishments."
Initial steps toward a wage levy, often referred to as garnishment, typically involve efforts to contact you and establish a payment arrangement. These efforts may include the following notices:
Notice CP504, Notice and Demand for payment: This notice outlines the amount the IRS claims in owed and serves as a formal demand for payment. You have the right to respond and doing so is critical. Failure to engage with the IRS or seek guidance from an experienced tax attorney may place you one step closer to wage garnishment.
Final Notice of Levy and Notice of Your Right to a Hearing: This notice is generally sent at least 30 days before a wage levy may occur. You might receive the notice at your place of business or last known address. Failure to respond can trigger wage garnishment or the placement of levies on financial accounts and other property.
Once a levy is in place, undoing it can required time and resources. According to the IRS, options for releasing a wage or other levy include:
Paying the balance owed or entering into a payment agreement with the IRS
Demonstrating that the levy creates an economic hardship or that the collection would be more effective if the levy is released
Submitting an offer in compromise (OIC), with the understanding that payment may be required quickly
Filing an appeal with the assistance of a tax attorney, even if an earlier deadline was missed
Many wage garnishments occur through state collection processes , such as child support enforcement. In most cases, opting out of these arrangements requires agreement by all parties involved.
IRS collection actions can be disruptive and stressful. Responding promptly to IRS notices and understanding your options early can help prevent wage garnishment and other asset seizures.
With offices in Chicago and Cleveland, our firm represents both domestic and international clients facing IRS collection actions, tax litigation, collection and criminal tax investigations. Experienced legal representation can make a difference. If you hear from the IRS, consider seeking guidance promptly. Call 440-250-9709 or request a consultation.