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An IRS tax levy occurs when a taxpayer ignores tax collection attempts from the agency. The levy allows the IRS to seize wages, bank accounts, real estate, vehicles, business accounts receivable, and other assets to repay the past-due tax debt. If you’ve received notice of a levy, these are the steps you need to take immediately to protect your property from seizure.
Although the words lien and levy are sometimes used interchangeably, these terms actually represent two separate steps in the IRS collections process. A lien is issued to give the IRS legal claim over the property in question, while the levy is the action of taking that property and selling it to satisfy the tax debt.
When a lien is placed on your property, the IRS has a legal right to the proceeds if you sell that specific asset. If you do not take action to settle the debt once a lien has been placed, you may receive a letter titled Final Notice of Intent to Levy.
Taxpayers have several opportunities to make arrangements for debt repayment before a levy takes effect. You will receive four notices about your tax balance before you receive the Final Notice of Intent to Levy, or Form CP90. Here are the other notices you will receive:
It’s important to act quickly once you receive a Final Notice of Intent to Levy. There are many actions you can take to stop an IRS tax levy.
For many taxpayers, entering into an installment agreement with the IRS is the most effective way to avoid a levy. This means that you’ll make monthly payments toward your debt until the full balance is repaid, including penalties and interest. Depending on your specific situation, you may qualify for one of three types of installment agreements.
A guaranteed installment agreement is available for taxpayers who owe less than $10,000 and have filed all outstanding tax returns. You must be able to pay off the entire balance in no more than 36 months, and you are not eligible if you have had an installment agreement with the past five years. If you meet these criteria, the IRS must enroll you in a monthly payment agreement and will not pursue additional collections actions if you comply with the terms of the agreement. In addition, you will not be subject to a federal tax lien. This public record can make it difficult to be approved for mortgages and other types of loans.
Streamlined installment agreements are available for taxpayers who owe up to $50,000. You must be able to repay your balance within 72 months, file all past-due returns, and agree to pay any future assessed tax on time. The availability of this program was expanded by the IRS Fresh Start Initiative.
If you are unable to qualify for either the guaranteed or streamlined installment agreement, you may be a candidate for a partial payment installment agreement. With this type of plan, you can take longer than 72 months to repay your tax debt. However, you will still be subject to a federal tax lien, which can damage your credit. To get started, you need to submit financial information to the IRS. It will use this data to determine the size of monthly payment you are able to make.
If you need help making payment arrangements with the IRS or establishing non-collectible hardship status, contact the team at Solvable today. We’ll match you with a highly reviewed company with experience in helping taxpayers like you. Avoid seizure of your property and move toward a brighter financial future.