When one thinks about IRS collections, 2 common methods come to mind. An IRS levy and an IRS tax lien. Many believe these to be one and the same, however they are very different.
An IRS levy is a seizure of personal assets to pay a tax liability, but a tax lien protects and secures the IRS interest in your property and any rights to property. It does not actually seize the property. It generally, goes into effect when you sale property. At the time of sale, the IRS has rights to the proceeds of the sale. Whereas an IRS levy actually seizes personal property.
Before the IRS can collect, usually 3 requirements must be met:
1. The IRS assessed the tax and sends a Notice and Demand for Payment.
2. The individual ignored or refused to pay the tax.
3. The IRS sent a Final Notice of Intent to Levy and Notice of Your Right Hearing at least 30 days before the levy. The IRS may leave it at a home, place of business or send it to the last known address that the IRS has on file.
There are 4 common forms of levy sources for the IRS:
1. Bank Account: A bank levy is when the IRS takes funds directly from a bank account. The tax payer will typically not know it until it has already happened. The bank will be required to hold the funds up to the amount owed on the day the levy came. If the levy is not released within 21 days, the bank is required to send the funds to the IRS.
2. Wage Levy: This levy is sent to the employer and requires that the employer withhold a certain portion of the pay check. The IRS can levy up to 85% of a pay check. The IRS can also levy Social Security Payment
3. Third Party Accounts: This would include retirement accounts, stock accounts, 1099 sources basically any source of income or assets with a few exemptions.
4. Assets: This is the least common type of levy, because it is typically difficult for the IRS to do. This would include cars, houses, boats or basically any other type of asset.
There is also a difference between a continuous levy and a onetime levy. A continuous levy would include wages, social security and other types of income. A onetime levy would include a bank levy and a 1099 income. The IRS only has rights to the amount in the account or due the independent contractor the day the IRS levy was received. This does not stop the IRS from levying again.
An IRS levy will continue until the tax debt is paid, the statues of limitations expires, or other arrangements are made, which could include an Installment Agreement, having the account put in Section 53 or a hardship, or having an Offer in Compromise accepted.
I recommend hiring a tax professional with experience in working with the collection department of the IRS will ensure that the tax laws are worked to the tax payer's advantage. An experienced tax pro will also know how to resolve tax liabilities and the quickest way to stop irs levy action based on the tax payer's particular situation.
Cynthia Kuhne has been helping people resolve their tax problems successfully for over 16 years. She is a licensed Enrolled Agent with both the knowledge and experience to stop IRS levy action quickly. She is the founder and president of CKTax Inc., a full service tax relief company with an "A+" BBB record. If the IRS has attached a levy to your assets, is about to, or you just have a tough tax problem, visit http://www.cktax.com/ or call 888-894-2005 now.
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