When you owe money to the Internal Revenue Service (IRS), one of the collection tools it may use is a levy. Because a levy allows the IRS to seize your property, it is critical to understand what it is and what you can do about it.
If you owe the IRS, the IRS can take your property to satisfy your debt if you are given proper notice. Some people think a levy is a claim against an asset— it is not. A levy is a taking of your property, a portion of your wages, or other assets to satisfy your debt. A lien is a claim made on your property to secure the eventual payment of your debt. The levy satisfies the debt through the seizure and likely sale of your property.
If the IRS decides to pursue a levy against you, it must first take several procedural steps to ensure your rights are observed. Those steps are:
- The IRS must prepare and send you a bill for the taxes you owe. The bill is called a Notice and Demand for Payment, or Notice CP504.
- You have the right to respond to the Notice. Unfortunately, many persons in debt to the IRS routinely dispose of IRS notices as “just another bill.” Others change addresses to avoid the IRS. Failing to respond to the Notice(s) moves you further downstream toward a levy or garnishment.
- If you do not respond to the initial notice, the IRS must send a Final Notice of Levy and Notice of Your Right to a Hearing. The Notice is sent approximately 30 days before the levy occurs. The IRS may send the Notice to your last address, via registered mail, or to your place of business.
- The IRS will provide you with notification of Third-Party Contact to alert you that they are contacting others to pursue a levy against your property.
The IRS seizes the property of taxpayers with a lot of money and those with very little. A similarity between the two is the lack of response to the IRS and a failure to make arrangements to pay the debt. Types of assets that can be levied include:
- Property such as a boat, car, house, or items of value
- Financial accounts, wages, dividends, rental income, business receivables
- Wages, retirement accounts
Responding to a Levy
The only way to avoid a levy is to pay your tax debt or reach out to the IRS and explain that a mistake was made—or explain your current circumstance and how you intend to pay.
If you believe the IRS made a mistake—be prepared to provide evidence and clear information regarding their mistake.
If you owe money that you do not currently have, consider a loan, or use a credit card. You can also enter into a short or long-term installment payment plan with the IRS. It is possible that you might qualify for an Offer-in-Compromise (OIC), but payment of an OIC is required more quickly than an installment plan.
If you respond late to the Notices sent to you, the IRS may have already seized your property or attached your wages. If you believe the IRS was in error at that time, you can file a claim for a wrongful levy. Keep in mind, if the IRS finds it wrongfully seized your property it can return the property (if it still has it) or compensate you for the amount that was seized.
Easier? Respond to IRS notices when you receive them. If you are unsure about your best option, connect with an experienced tax attorney to help you understand your best path out of tax debt.
Experienced tax attorneys help you today if you are facing an IRS levy, tax litigation, or criminal tax charge
Serving local and international clients from offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC delivers strong representation and guidance to those facing significant tax liability, offshore tax concerns, or payroll tax issues, among other challenges. Call 800-579-0997 or contact us online today.