When your employer notifies you that they have received a Wage Levy against your paycheck, you need to contact a Tax Professional immediately! In most cases you will not be left with enough money to pay your rent or mortgage, your car payment, or even to feed your family.
If you fail to respond to the IRS or refuse to cooperate with them, the IRS will institute enforced collection procedures against you, in order to get your attention and begin collecting the taxes you owe. One of the most commonly used enforced collection procedure is to levy or garnish your wages, salary, and other income. The IRS accomplishes this by sending a notice to your employer or client, in the case of independent contractors or consultants.
Upon receiving the Notice of Levy from the IRS, your employer or client is required to withhold funds that must be paid to the IRS. The payment by your employer or client to the IRS is made on the same date that wage or contract payments are made to you.
In the case of a wage levy, the IRS will not take all of your wages or salary, however the amount they will allow you to retain is insufficient for most taxpayers to pay their basic living expenses. The Levy will remain in place until it is released by the IRS or the total tax liability has been paid in full. The IRS will generally release your levy if you agree to pay your tax liability in installment payments or if you file an Offer in Compromise.
You need to contact a Tax Professional as soon as you are notified by the IRS that they intend to file a Levy against your income.
Another common enforced collection method is the Bank Account Levy. You only have 21 days to prevent the levy from taking place by obtaining a Bank Levy Release. You need to contact a Tax Professional as soon as you receive notice from the IRS that they intend to issue a bank levy.
Locating your bank or other financial institutions used to be a difficult task for the IRS, however the IRS now subscribes to financial aggregator’s database services and can locate your bank accounts in a matter of seconds by entering your social security number into the database. The IRS also locates your bank accounts from your 1098 forms which include the name and address of the financial institution that may have your money.
Seizure of your bank account or your assets is the ultimate action in their collection efforts. The IRS sends a Notice of Levy to the financial institution informing them that you owe taxes. The IRS Notice requires the financial institution to freeze all accounts with your social security number immediately. This freeze may cause your checks to bounce. The bank must hold these funds for 21 days. At the end of that period, the bank must remit the funds to the IRS.
This 21 day period allows you time to negotiate with the IRS to release the freeze. Although in many cases the bank levy is wrong, it is up to you to correct the problem.
As the enforced collection process continues and you continue to ignore the IRS or fail to cooperate with them, the IRS will begin enforced collection procedures against all of your property. This usually occurs after you fail to contact the IRS or you fail to work with them to resolve your tax situation. They will seek to levy (seize) as much property, real or personal, needed to pay all taxes, fees, costs and expenses of the levy. The IRS can seize your vehicles, boat, real estate, furniture and personal effects, books and tools of your trade or business in excess of an exempt amount, and in severe cases, and after court approval, even your home.
The IRS has broad powers to seize assets to pay your tax liabilities. After the IRS has seized your property, they will attempt to sell it at public auction. The IRS will advertise in local newspapers that they have seized your property for nonpayment of taxes and that such property is available at public auction. This process can be stopped by obtaining an Asset Levy Release, however you will need an experienced tax professional to contact the IRS and resolve your outstanding tax liability.
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