Many creditors will do anything to ensure they get paid, and the IRS is not an exception. In fact, the zeal with which Uncle Sam uses to ensure that all the taxpayers who owe him pay is admirable. Some defaulters can really be stubborn and the IRS, after using more “polite” means (like sending notices and reminders to pay up), turns to the more aggressive and merciless mechanism of levying.
When you are levied, your property or assets are seized by the IRS. There is a clear distinction between a levy and a lien, as the later is filed against a defaulter only to act as some form of security. While a lien will bar the owner from selling a property like a house, for example, a levy goes ahead to actually take the property to clear off a tax debt. This is however, only resorted to by the IRS as a last resort as a defaulter is granted sufficient time and chance to resolve his or her debt either through an Installment Agreement, Offer in Compromise, or in one lump sum payment.
The IRS firsts sends the initial notice and when it is not responded to, the IRS goes ahead and issues a Final Notice of Intent to Levy and the accompanying Notice of Your Right to A Hearing (levy notice). This is mainly sent via certified mail at least thirty days before the levy. The thirty days are meant to enable a taxpayer appeal against the impending levy, but if it appears that the notice has been ignored by the taxpayer, the IRS can proceed to levy your assets to clear your tax debt.
Wage Levy: The IRS can decide to take a chunk off your monthly wages after notifying your employer or certain plans’ administrator. This levied amount is not released until you have fully cleared the debt. Even though a few factors are looked into before settling on the amount to levy from your wage, you will definitely end up with far much less income than usual. A wage levy stays valid until the whole owed amount has been cleared.
Bank Levy: The IRS can also levy your bank account after sending your bank a letter with instructions on the same. A copy is sent to you as well and your bank has twenty one days to release the levied amount straight from your bank account to the IRS. A bank levy is not auto-renewed as the IRS will have to issue another bank levy if the earlier one didn’t clear the tax debt.
Property Seizure: The IRS can decide to seize and sell your property like houses, automobile, or business assets.
Levying is however, governed by some rules regarding the timing, type, and net value of assets. School books, some clothing, some annuities and pensions, unemployment benefits, service-connected disability payments, salary, wages, or income included in a judgment for court-ordered child support payments, and some types of public assistance, among others cannot be levied.
It is important to bear in mind that it is not the IRS’s wish to levy your wage, bank, or property, as it is much easier cashing a check than struggling with some remote property. You can however, reverse this decision if you hire a competent tax professional as soon as you receive the IRS notice of Intent to Levy. Don’t ignore any IRS notices and talk to the IRS on other payment methods and avoid the nasty tax levy altogether.