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What is a Tax Levy? LifeBack Tax
When the government struggles to collect back taxes from an unresponsive taxpayer, they may ultimately resort to a tax levy, legally seizing the taxpayer's property and assets to pay their tax debts. Tax levies are among the harshest actions taken by federal, state, or local tax authorities to collect past due taxes from delinquent taxpayers. A tax levy may also be referred to as an administrative levy or an asset seizure.
A tax levy should not be confused with a tax lien, which merely asserts the government's claim to the taxpayer's assets. In fact, the Internal Revenue Service treats administrative levies as a fully separate process from federal tax liens, and is not required to file a public Notice of Federal Tax Lien before issuing a tax levy. Unlike foreclosure of a tax lien, an administrative levy allows the IRS to seize property without taking the taxpayer to court. Typically, the IRS typically only resorts to a tax levy when all other options have failed.
Before enacting a tax levy for back taxes, the IRS sends the taxpayer a Final Notice of Intent to Levy, warning that their property and assets are at risk of seizure. This notice gives the taxpayer 30 days to challenge the IRS's levy. If the taxpayer still does not respond within the given time, the IRS may begin levying the taxpayer's property and assets to pay down the taxpayer's liability. State tax authorities often follow similar procedures when enacting a tax levy for state back taxes, though the allotted time to appeal may vary from state to state. Notoriously, some states have been known to seize a taxpayer's assets without providing a prior notice of levy at all.
An administrative levy immediately puts your business or livelihood at risk. The government may seize almost any of the taxpayer's assets that have equitable value, including real property, jewelry, cars, boats, aircraft, business assets, bank accounts, and wages or salaried income. Even jointly owned assets may be levied, as long as the other co-owners are compensated.The IRS is also permitted to levy certain forms of income that are usually protected from garnishment, such as Social Security benefits, spousal support (unless part of court-ordered child support), veteran benefits, tax refunds, and retirement accounts. Certain assets may be exempt from tax levy, such as basic clothing, school books, personal items and necessities up to a fixed total value, and a minimal amount of income to cover basic living expenses.
A tax levy is released when the taxpayer pays their past due balance, agrees to a payment solution, negotiates to have the levy released, or proves that their assets were wrongfully levied. A tax levy may also be released if the levy puts the taxpayer in financial hardship. When a levy is released, the government halts all asset seizures, including bank levies and wage garnishments.
If you have received a levy notice for unpaid taxes, we recommend contacting the IRS or your state tax agency immediately. We at LifeBack Tax are committed to defending the livelihood of taxpayers, and can represent your case to the government. We will protect your assets from seizure and arrange to have your levy released as soon as possible.
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