Tax Levy

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When we hear the word “levy”, we automatically think of it as something that is imposed or legally required. And while it is true that it’s an imposition, there is more to tax levy than what is commonly thought. 

What is a “tax levy”? 

A tax levy is a term that refers to the collection or seizure of an individual’s property so that unpaid taxes can be settled. When it comes to the different forms of a tax levy, the Internal Revenue Service (IRS) can impose tax levies by seizing various kinds of assets such as: 

Is tax levy the same as a tax lien? 

Although a tax levy and a tax lien are related, these two are different from each other. When we say tax lien, this is a legal claim the federal government makes on a taxpayer’s property, assets, and real estate when they have tax debts. Concerning this, a tax levy is an actual act of taking or seizing the property, asset, or real estate to pay for the tax debt. 

Are there different types of tax levies? 

Yes, there are several tax levy types which include the following: 

 

 

 

 

 

 

What does the Internal Revenue Service (IRS) have to do before a tax levy can be enforced? 

As in all things, the IRS follows a set of strict procedures and requirements before imposing a tax levy on anybody. A thorough assessment of taxes will be carried out and the IRS will send the taxpayers a “Notice and Demand for Payment,” a tax bill that requires payment. If the taxpayer neglects or refuses to pay the required amount, the IRS will send several letters with a warning of the consequence for refusal to pay. 

The IRS will then send a “Final Notice of Intent to Levy” and “Notice of Your Right to A Hearing” at least 30 days before the levy is to take place. This can be given to the taxpayer, leave it at their home or usual place of business, or sent to the last known address by certified or registered mail with return receipt requested. During this time, the taxpayers are given 30 days to satisfy the debt or resolve the taxes owed.

 If the IRS levies the taxpayer’s tax refund, a “Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing” will be received after the levy. Additionally, the IRS will send the taxpayer a notification in advance of any Third Party Contact to let them know that the IRS can contact third parties for the collection of unpaid taxes. 

How can a tax levy be avoided? 

It is no secret that the best way to avoid a tax levy from ever happening is by timely filing returns and paying taxes when they are due. Taxpayers can request an extension for more time to file. In case that they cannot pay the full amount due, contact the IRS to resolve the remaining balance. Taxpayers can set up a payment plan, for example. Another important thing to remember is to always respond to billing notices from the IRS. They are not something that you can simply sweep under the rug. If you receive a “Final Notice of Intent to Levy”, please contact the IRS as soon as possible. 

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