IRS levy is just step behind the tax lien
IRS tax levy is simply a continuation of the enforced collection process by the government. We have received over 20 emails on the subject just this week alone, as folks are fretting and IRS has stepped up its collection efforts, at least it feels like. Basically, a tax levy is a legal seizure of your property to satisfy a tax debt. While lien is a claim used as security for the tax debt, a levy actually does take the property to satisfy that debt. Sort of like being first indicted, and convicted afterward. Makes sense doesn’t it? There are several important points to know.
Once IRS puts a tax lien against you by filing the Notice of Tax Lien, it basically stakes a claim against any of your assets. The filing, almost universally, takes priority over other creditors. It has to be satisfied first and unless you do so, IRS may now seize and auction any type of real or personal property that you own or have an interest in, including car, boat, house, guns or jewelry. IRS can also levy your property held by someone else, such as wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, cash loan value of your life insurance, or commissions.
An IRS levy against your assets is normally executed only after these three requirements are met,
- IRS assessed the tax and sent you a Notice and Demand for Payment
- you neglected or refused to pay the tax
- IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before the levy.
Such a levy notice can be delivered in person, left at your home or business, or sent to your last known address by certified or registered mail, return receipt requested. However, if IRS tax levy is for your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy. You may ask an IRS manager to review your case, or you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a Collection Due Process hearing with the IRS office listed on your notice. You must file your request within 30 days of the date on your notice.
Here are some points of argument that you can use, according to IRS,
- you paid all you owed before the levy notice was sent
- IRS assessed the tax and sent the levy notice when you were in bankruptcy, and subject to the automatic stay during bankruptcy
- IRS made a procedural error in an assessment
- The statute of limitations on tax collection expired before IRS sent the levy notice
- you did not have an opportunity to dispute the assessed liability
- you wish to discuss the collection options
- you wish to make a spousal defense
Once a Collection Due Process hearing is over, the Office of Appeals will issue a determination. You will have 30 days after the determination date to bring a suit to contest the determination. See Collection Appeal Rights for more information. If your property is levied or seized, contact the IRS representative who took the action. You also may ask the manager to review your case. If the matter is still unresolved, the manager can explain your rights to appeal to the Office of Appeals.
Few more very interesting facts on levying your wages, federal payments, state refunds, or your bank account.
If IRS levies your wages, salary, or federal payments, the levy will end when,
- the levy is released,
- you pay your tax debt
- the time expires for legally collecting the tax
If there is IRS levy against your bank account, the bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows time to resolve any issues about account ownership. After 21 days, the bank must send the money plus applicable interest, if it to the IRS. To discuss your case, call the IRS representative whose name is shown on the Notice of Levy. If there is a mistake in levying your bank account, you can file a claim for reimbursement within 30 days.
Here are the information regarding Federal Payment Levy Program, and the link on State Income Tax Levy Program for all states as well as on Permanent Fund Dividend through the Alaska Permanent Fund Dividend Levy Program.
Finally here are the 2008 Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income. Previously, How to remove tax lien from credit report.
