If you owe taxes, the IRS has almost unlimited power to implement a tax levy. While it can feel like a David and Goliath fight, there are some things you can do if you find yourself in this situation.
An IRS levy can mean garnished wages, seizure of property, savings and other assets in your possession. Continue reading this article to find out the best ways to stop an IRS tax levy.
Stopping a Tax Levy from Ruining Your Life
When you get hit with a tax levy, it can feel like it is the end of the world. If you know how to stop the IRS from taking your money, it does feel a little better. Use these tips to save your money and protect your lifestyle.
You may think the only way to stop suffering from a tax levy is by going bankrupt, but that isn’t the case.
What Is a Tax Levy?
A tax levy is when the government takes your wages, assets or parts of other income when you don’t pay your taxes. These levies are a way to let people know they can’t get away with failing to pay their taxes.
Tax levies may seem unfair and even unethical but the law is the law, and there is very little you can do to avoid these heavy burdens. There are some things you can do to prolong the time you have to prepare to make money needed to pay your taxes. While you can push out the time you have to pay your taxes, you cannot stall indefinitely.
Here are some great tips for getting out of a tight spot with tax levies.
1. Make Sure It’s a Levy and Not a Lien
Before you start researching ways to stop your levy, make sure it isn’t a lien. The difference between a tax levy and a tax lien is as follows. A tax lien is a claim used as a security for a tax debt, but a levy takes your assets and income.
While the lien is a formal declaration you owe the tax debt, it doesn’t start taking your money.
2. Know When the IRS Levies
The IRS only levies tax debt after a declaration and demand for payment are sent. You will also have to fail to pay or refuse to pay the debt. The final piece of the puzzle is the official letter letting you know the levy is coming.
If you aren’t to that step in the process, you have some time to get things together and possibly avoid the levy altogether.
3. Request a Hearing
If you do find that you are under a tax levy, you need to request a collection due process hearing. This may be your last chance to save yourself short of speaking with a tax litigation expert for help.
This hearing is commonly referred to as a CDP hearing. You have to file for the hearing before the 30 days after you receive the letter of intent to levy taxes.
When you request a CDP hearing, the IRS will not be able to put a levy on your taxes until after the hearing.
Depending on your situation, you have different options. If you are a spouse, you can even request to be considered as an innocent spouse. If you are ruled an innocent spouse, the IRS cannot come after you and your assets.
4. Enter a Payment Instalment Agreement
While you might not have money to pay for your full tax burden, you may be able to set up a payment installment agreement. Depending on the amount of your tax burden, you may be able to get a payment you can afford.
If you choose not to enter into a payment installment agreement, it is likely the tax levy will be more than those agreements. The IRS is not required to leave you with a large amount of money and is the most aggressive creditor with the least laws to follow.
5. Request an Offer in Compromise
Many people try to go for an OIC or offer in compromise. OICs aren’t always successful, but many people are able to make a plea to pay less in taxes. If your OIC is successful, you may only pay a fraction of your total tax bill.
Many people find it helpful to use attorneys to help them through the process since it can be complicated and time-consuming. This great resource from Precision Tax is a must read before you do any litigation.
Tax Levies & Appeals
Depending on your situation, you may be able to appeal your tax levy. If the IRS sees there is a serious economic hardship because of the levy they may choose to release it. While this isn’t often the case, it is worth trying to appeal to keep yourself out of trouble.
If you enter into an installment agreement, the IRS will release your levy. If you pay all of your taxes, the IRS will release the levy. If the levy is not released when you start paying your installments or when you’ve paid your taxes in full, you should notify the IRS immediately.
Rising Tax Penalties
If you try to avoid paying your taxes for as long as possible, you are making matters worse. Tax penalties can get out of hand and will make your mountain of tax debt seem even more insurmountable.
If you look at your situation and decide you don’t want to handle it alone, gather as much information as possible. The more information your accountant has, the easier it will be for them to help you through the process. Another team player you may want to include is an attorney to help you navigate the confusing waters of tax law.
Increase Your Knowledge & Protect Your Income
The best way to keep from experiencing a tax levy is by paying your taxes properly. Read our article about how to stay on top of your taxes today to keep out of trouble with the IRS.