IRS levies are powerful tools used to collect unpaid tax debts. They allow the IRS to seize assets, income, or even funds directly from third parties, including your employer or financial institution. Here, we’ll delve into the different types of IRS levies, the circumstances that lead to their issuance, the potential for appeals, and the pivotal role that representation by a tax attorney or enrolled agent can play in getting levies released.
Types of IRS Levies:
- Wage Levy (Wage Garnishment): A wage levy allows the IRS to seize a portion of your paycheck to satisfy your tax debt. This is an ongoing process, not a one-time seizure, meaning it will affect every pay period. The IRS will continue to take a portion of your income from each paycheck until the tax debt is paid or the levy is released. The amount seized depends on various factors, including the number of people in your household but will leave you with a fraction of your average take-home pay.
- Bank Levy: With a bank levy, the IRS instructs your bank to freeze and eventually remit funds from your bank account to cover your tax debt. At the time the bank receives the levy, they are to hold the funds for 21 days before forwarding them to the IRS. During this 21 day period, you have the opportunity to prove to the IRS that the levy is causing financial hardship – preventing you from being able to pay your necessary living expenses and must be released.
- Accounts Receivable Levy: This type of levy is specific to business owners. The IRS, typically a Revenue Officer, issues the levy to your customers, instructing them to pay the IRS directly instead of your business. This can be detrimental to your business’s cash flow and reputation. Depending on your contracts with your customers are set-up, these levies could be one-time payments or ongoing until the tax is paid or the levy is released.
Circumstances Leading to Levies:
The IRS typically resorts to levies when other attempts to collect the tax debt have been unsuccessful. The IRS is required to send a series of notices to the taxpayer providing them with multiple opportunities to resolve the tax balance before enforced collection action can occur. Common scenarios that can trigger levies include:
- Unpaid Taxes: When you owe back taxes and have not entered into a payment arrangement or failed to adhere to an existing one.
- Ignored IRS Notices: If you have ignored IRS notices and failed to respond or address your tax debt.
While the IRS’s authority to issue levies is substantial, there are avenues for appeal. Appeals are essential when you believe that the levy was issued in error, or you can demonstrate that releasing it is necessary to prevent financial hardship. The appeals process typically involves the following steps:
- Request a Collection Due Process (CDP) Hearing: You can request a CDP hearing within 30 days of receiving the IRS notice of intent to levy. This hearing allows you to present your case to an IRS Appeals Officer. The Appeals Officer will act as a “neutral” third party between the taxpayer and the IRS. It is typically your final chance to prevent a levy from occurring.
- Prepare and Present Your Case: At the CDP hearing, you, or your representative, can present evidence, which typically includes preparing a Form 433A to argue why the levy should be released or modified due to the financial hardship it would otherwise cause. Demonstrating financial hardship or an error on the IRS’s part can be key points in your case. If the CDP hearing is not held, your case will be sent back to collections where you will be open for levy action.
- Appeal Further: If the outcome of the CDP hearing is unsatisfactory, you can appeal to the U.S. Tax Court or explore other legal remedies.
Role of Professional Representation:
Having professional representation, such as a tax attorney or enrolled agent, is crucial when dealing with IRS levies:
- Expertise: Tax professionals understand the intricacies of IRS rules and regulations regarding levies. They can assess your situation and develop a strategy for getting the levy released or modified.
- Negotiation Skills: Tax professionals can negotiate with the IRS on your behalf, presenting your case persuasively and advocating for your best interests.
- Documentation: They can help gather and organize the necessary documentation and evidence to support your appeal, ensuring that your arguments are backed by strong evidence.
- Compliance Management: Tax professionals can help you remain in compliance with any modified payment arrangements, preventing future levies or collection actions.
In conclusion, IRS levies are formidable tools used to collect unpaid tax debts, and they can be issued in various circumstances. However, they are not without recourse. You can appeal levies, especially if you can demonstrate financial hardship or errors in their issuance. Professional representation by a tax attorney or enrolled agent is essential in navigating this process effectively. These experts bring expertise, negotiation skills, and the ability to present compelling arguments, increasing your chances of getting levies released and finding a resolution to your tax debt.
Why Choose Hood Tax Resolution?
When it comes to resolving tax problems, choosing the right partner can make all the difference. Hood Tax Resolution stands out as the ideal choice because of our seasoned team of tax attorneys and enrolled agents, with decades of invaluable experience. Our team possesses an in-depth understanding of tax laws, regulations, and IRS procedures, enabling us to craft strategic, personalized solutions for every client. We’re not just about resolving tax issues; we’re committed to protecting our clients’ financial well-being and ensuring a brighter financial future. With Hood Tax Resolution, you’re not just hiring a team; you’re securing peace of mind and a clear path toward tax resolution. We have helped thousands of clients across the nation and are ready to help you put your tax problems in the rear-view mirror.
Are you facing a levy? Contact our team today to schedule your free initial consultation.