Do you know what is a tax levy? Tax levy definition: When you don’t pay taxes on time, the Internal Revenue Service (IRS) takes legal action to seize your assets. This action is called a tax levy.
A tax levy leads to the authorized capture of your various assets. It is a potent tool for collecting tax debts. Some typical examples are:
- Bank accounts
- Investment accounts
- Income
- Social security
- Pensions
- Insurance
- Physical property
Read: Do strippers pay taxes?
What are the Types of Tax Levy?
The IRS implements the most effective technique to collect outstanding debt. Tax levies can take many different forms. Typical tax charges include the following:
Wage Garnishment
Until the whole amount owed (including penalties and interest) is paid, the IRS requires the employer to take a portion of the income to pay the debt.
Bank Levy
The IRS may freeze a taxpayer’s bank account for 21 days. After this time, the money is taken out to pay off the loan. If the account has insufficient money, the IRS can repeat the procedure.
1099 Levy
To recover what is due, the IRS targets existing 1099 payments.
Property Seizure
The IRS can take possession of and sell a taxpayer’s property to collect the tax obligation.
Also, read about property taxes on new construction.
Snatching Other Assets
The IRS can also seize other assets, including life insurance, stock dividends, and retirement savings.
Seizure of Passport
The IRS has the authority to ask the State Department to cancel or refuse a passport for unpaid taxes over $50,000.
Read: What is a VAT number in the US?
The Tax Levy Process
Now what you know about what is a tax levy, understand its process:
A taxpayer receives several notifications before the IRS can confiscate any property. The IRS determines the amount of tax due and issues a tax bill to start the procedure.
The IRS issues many warnings if a person fails to make payments. In the final notification, known as the “Final Notice of Intent to Levy,” the taxpayer has 30 days to pay the debt or risk having their assets seized.
Reach out to our tax consultancy services.
Pause or Undo a Tax Levy
The best ways to avoid a tax levy are to:
- Pay the tax in full on time, or
- Set up a payment plan with the IRS
In addition, taxpayers can file an appeal to stop the levy, particularly if they are experiencing financial difficulties.
It is challenging to reverse a tax levy. However, the IRS may do so if the assets are necessary for earning income or if the correct processes were not followed.
The Bottom Line
To comprehend the in-depth insights of what is a tax levy, contact L&Y Tax Advisor now. We will assist you in safeguarding your assets and guiding you through the procedure.
