Tax Relief Blog
An IRS Tax Levy is perhaps defaulting taxpayers’ worst nightmare but it is not altogether a rare occurrence and statistics place the number of Angelinos in Los Angeles, and American individuals, or businesses who are levied by the IRS; in millions every year.
A tax levy is by no means a cruel and unusual punishment but is a logical course of action against intentionally defaulting taxpayers by an arm of the government which collects the financial resources needed to run the country.
Paying taxes is every citizen’s duty and it is what is owed to the country by a private citizen, company or enterprise. Failure to pay taxes results in consequences. However, in all fairness a tax levy isn’t the first course of action taken by the IRS to ensure payment of taxes.
So what is a tax levy, why is it to be avoided at all costs and how does it prove to be an effective tool against defaulting taxpayers; read further to know more.
Call our Los Angeles based tax representation firm at 877-788-2937.
What is an IRS Tax Levy
Prolonged and intentional defaulting of tax payments often attract a tax levy which in turn is often preceded by a tax lien. In simple layperson terms; you don’t pay taxes and you lose in the form of a tax levy which authorizes the IRS to seize your property and assets. The Internal Revenue Code of the United States (IRC 6331) enables the IRS to seize property of defaulting taxpayers without going to court. The property and assets subject to levying by the IRS ranges from real estate, personal residences, wages, social security payments, bank accounts, insurance proceeds and account receivables. Our Los Angeles based tax representation firm helps taxpayers in SoCal areas of Long Beach, Santa Ana and all other states.
Pre-Levy Procedural Requirements
While the idea and basic definition of a levy may lead to the idea that this is a harsh and overbearing IRS imposition; one must bear in mind that the IRS follows a strict procedure for the benefit of a defaulting taxpayer before levying on or seizing the defaulter’s property and assets.
The procedure is rooted in the 5th Amendment of the Constitution that forbids the forced possession of an individual’s personal property or assets by the State or Federal government, without due process of law.
As such;
- In compliance with the Constitution; the IRS should and will furnish the defaulting taxpayer with prior notice of the upcoming levy.
- This prior notice from the IRS must reach the taxpayer 30 days before imposition of the levy.
- The notice can be sent by the IRS by hand or certified mail to the defaulting taxpayer or can even be handed over at the defaulting taxpayers place of business.
- This ‘Notice of Intent to Levy’ may not be applicable if the IRS has enough reason to believe that the defaulting taxpayer intends to flee the country, plans to transfer property and assets before being levied or is making an effort to conceal property and assets. If the IRS concludes that the collection of taxes is being jeopardized by the defaulting taxpayer’s actions; the IRS can impose a levy as soon as notice has been served.
From the facts stated above; it is quite apparent that the IRS follows the letter of the law while imposing levies and even a determined levy is not without the chance of reprieve.
The ‘Notice of Intent to Levy’ comes with the IRS Form 12153 which the defaulting taxpayer can make use of to avail of a CDP hearing. The ‘Notice of Intent to Levy’ makes this quite clear in simple and non-technical terminology. The CDP hearing comes within the 30 day period after which the levy is imposed.
A neutral and non-biased hearing appeal officer will preside over the CDP hearing during which the defaulting taxpayers can challenge the intent to levy with the help of tax attorneys, EAs, CPAs in most cases. In many cases the defaulting taxpayer and the IRS arrive at mutual agreements or a compromise that involves making back tax payments in installments.
If the taxpayer isn’t satisfied with the conclusions at the CDP hearing; he or she may approach the United States Tax Court for a solution by filing a petition within a 30 day period of the notice of determination.
If all attempts at reaching an alternative solution for tax collection by the IRS or tax payment by the defaulter are not successful; the IRS goes ahead and imposes a levy on the defaulting taxpayer in a number of ways.
Wage Garnishment
The IRS can impose a levy by the garnishing of wages. This is a common tax collection tactic wherein the IRS has the authority to demand a percentage of the wages of errant and defaulting taxpayers who been served a levy notice. In such cases; the employer generally complies with IRS directives owing to the financial liability of having to pay back taxes for the defaulting taxpayer from one’s own pocket. Often times; a tax attorney, EA, CPA may assist a levied taxpayer with putting forward a plea to the IRS for decreased levies if financial difficulties can be proven.
Bank Levy
A bank levy is yet another tactic employed by the IRS to collect back taxes from a defaulting taxpayer. The IRS directs the taxpayers bank to completely limit access for the taxpayer to his or her bank account. 21 days later; the IRS starts the process of withdrawing money and collecting back taxes in full or in part; as and when monitory receivables come into the defaulters account.
Property Seizure
Property and asset seizure is yet another tactic employed by the IRS to collect back taxes from the defaulting taxpayer. Property and assets such as houses and vehicles are seized and auctioned before pending tax payments are recovered.
The IRS may also levy retirement accounts, social security, dividends, licenses, life insurance, rental income, accounts receivable or commissions to recover back taxes.
Most defaulting taxpayers who have been levied by the IRS employ the services of qualified and authorized tax attorney, EA, CPA to challenge the terms and conditions of the levy. This can even involve negotiations with IRS to get the levy removed and have the back taxes paid in installments instead. These negotiations are often successful.
Call our Los Angeles based tax representation firm at 877-788-2937.
