An IRS tax levy is a procedure, usually of last resort, to collect on unpaid taxes. Therefore, it is imperative that you pay your taxes on time. But what happens when you don’t have the money to pay? Most likely, the IRS will send several warnings. If you ignore the warnings, you will almost certainly face the prospect of a levy.
Levies come in different types. One is a bank account levy. The IRS can seize control of your bank account and take the money to offset your debt. Another type is wage garnishment. The IRS can take a portion of your wages directly from your employer. They can also seize your property assets, like your car or home. This is the least likely, though certainly a possibility, because they then must liquidate those assets themselves. They can also reduce your tax refunds to offset debt.
The last thing you should do is ignore your tax debt. No matter the reason, if you’re under levy from the IRS, there are some savvy ways to handle them.
Hire a Tax Attorney
If you are facing a levy from the IRS, the best advice is to hire a tax attorney. Tax attorneys know the laws, understand the IRS’s filing system, and in some cases have working relationships with IRS employees.
When looking for a tax attorney, make sure you find one that has experience in your particular situation. There are many tax relief services advertising their services, yet they may not be familiar or experienced in your particular situation.
Pay the Debt
This is the most obvious solution, and the most expeditious. Sometimes people don’t get a notice from the IRS. Maybe they moved, or it got lost in the mail.
If you’re the type to ignore letters, you’ll find yourself facing a levy eventually. If you really owe the money, paying it off is the simplest way to get the levy removed, or avoid it altogether.
People don’t always have the money to pay when they file their taxes. That’s why the IRS created installment agreements. These come in two types.
You can set up a short-term agreement which allows you to pay the entire debt in under 120 days. There are no fees to set this up, but you will be responsible for interest accrued.
A long-term agreement allows you to pay in over 120 days. They do have a set up fee, require a deposit, and you are responsible for interest accrued. The benefit is less financial strain.
Offer in Compromise
An offer in compromise is used to negotiate a settlement for a fraction of what you owe. You submit an offer to the IRS detailing what you can afford and provide a down payment with your application. Be certain your offer will be accepted because the IRS will apply your deposit against your debt if they deny your offer.
The IRS has expansive authority to seize your assets without filing a lawsuit and obtain a verdict against you. Don’t let the IRS get ahead of you. If you communicate, and set up the right arrangements, you can avoid a tax levy.