Even if you’ve tried your hardest to pay your back taxes, it isn’t always easy to handle past-due taxes. Unfortunately, the more behind you get on your taxes, the more options the Internal Revenue Service (IRS) has to collect what you owe. Finding out that the IRS has placed a tax levy on your property is never the kind of news you want to receive, but it doesn’t have to be as final as you might think.
If you’ve received a tax levy notice from the IRS or if you’re wondering how to stop a state tax levy, you have several helpful options to consider. Find out how an IRS tax levy affects your finances and learn how you can stop a tax levy to resolve your back taxes.
The IRS has a long list of methods it can use to resolve outstanding back taxes and collect what taxpayers owe. When the IRS places a tax levy on your property, the agency legally seizes your property in order to collect your back back taxes. With a tax levy in place, the IRS can seize almost any type of property, including your bank account, your wages, your retirement account, or even the cash value of your life insurance policy. Take a closer look at what a tax levy means for you and how this method differs from other collection strategies.
The IRS and state tax agencies can issue several different types of tax levies on your property. In most cases, the agency pursues the easiest option for collecting back taxes. The most common tax levy definitions include:
The major difference between a federal and a state tax levy is the agency involved. The IRS handles all federal tax levies, while your state tax agency usually places any state levies. In some cases, however, the IRS can levy your state refund, which means the federal agency can seize the funds you expect to receive back from your state tax return.
In most other ways, state and federal tax levies are very similar. Both the IRS and state tax agencies have a series of actions they can take to collect your past-due back taxes, and for both types of agencies, a tax levy is considered a last resort.
First, the agency assesses your tax and sends you an official payment notice or tax bill. If you fail to pay your tax bill for an extended period of time, the IRS or your state tax agency can consider alternative options for collecting payment. Depending on your individual situation, including the total amount you owe and the value of the assets you have, tax agencies might decide to pursue a tax levy.
No matter whether you’re dealing with the IRS or your state tax agency, you can rest assured that you won’t be surprised by receiving a tax levy notice all of a sudden. Instead, you’ll receive a series of notices that warn you about impending actions like a tax levy.
Both the IRS and state tax agencies can pursue a bank levy in order to collect your back taxes. A bank levy is a type of tax levy that legally allows the IRS or a state tax agency to withdraw funds directly from your bank account.
When the IRS or a state tax agency issues a tax levy on bank accounts, your financial institution is required to place a hold on the funds in your account. After a 21-day waiting period, your bank has to allow the agency to withdraw enough to cover your back taxes. As long as the bank levy is in place, your financial institution has to allow the agency to continue to withdraw funds until your back tax amount is satisfied.
Although tax levies and tax liens sound similar, these two methods have different outcomes. A tax levy permits the IRS or your state tax agency to begin seizing your property, but a tax lien is simply a legal claim against your property.
While a tax lien doesn’t give the government permission to seize your property, it can lead to more serious issues. For example, you won’t be able to sell and receive payment for property affected by a tax lien, as the proceeds will go to the IRS or your state tax agency. If you don’t attempt to pay your back taxes, the IRS or your state tax agency can escalate a tax lien into a tax levy and begin seizing your property.
When you receive an IRS tax levy notice, resist the temptation to panic. Instead, read the notice carefully to make sure you understand what it means for your tax situation. In most cases, the IRS sends the Final Notice of Intent to Levy 30 days before the levy takes effect. That means you still have a month to resolve your back taxes, consider your tax settlement options, and seek out expert help. If you take action quickly, you could avoid a tax levy and resolve your tax issues without losing your property, wages, or income.
The Final Notice of Intent to Levy also Indicates that as a taxpayer, you have the right to a hearing. Also known as a Collection Due Process (CDP) hearing, this type of hearing gives you an opportunity to resolve your tax issues without entering a lengthy and expensive court battle.
However, it’s important to note that you don’t automatically get a hearing date. Instead, you have to request a CDP hearing within 30 days of receiving your final notice. If you complete this step in time, you’ll get a hearing and a chance to avoid a tax levy, as long as you have a strategy for stopping it.
Receiving a tax levy notice doesn’t mean that you have no other choice but to allow the IRS or your state tax agency to seize your property. Instead, you can consider a number of different methods for stopping or releasing a tax levy. Find out how to stop a tax levy and resolve your back taxes without losing your property permanently.
The most effective way to avoid a tax levy altogether is to file all tax returns on or before the due date. When you meet all IRS and state tax agency deadlines, you’re much less likely to receive penalties and other adverse actions like tax levies. To file on time, make note of all tax-related deadlines, including the standard April 15th filing date and any applicable extension dates.
In addition to filing your tax returns on or by the deadline, it’s also essential to pay your tax bills on time. Each time you file a return calculate your quarterly payment, check to confirm what you owe. Then make a point of paying the full amount by the standard, extension, or quarterly due date.
Remember that the IRS and your state tax agency may also issue bills after assessing your tax situation. Watch for these payment notices to arrive in the mail, and make note of the due date. In most cases, you have 30 days to pay after receiving a notice from the IRS or your state tax agency.
It happens to everyone. Sometimes you can’t file your taxes on time, especially if you’re waiting for important tax forms or if you’re recovering from a major life event. No matter the reason, you can request an extension and avoid a tax levy.
If you use IRS Free File to submit tax returns, you can also use the online service to apply for an extension. If you don’t qualify for IRS Free File or if you’d rather use a paper form, you can submit IRS Form 4868 to request an extension. In both cases, you must file an extension request by April 15, and you can expect to receive an additional six months to submit your tax returns.
Keep in mind, however, that an extension for filing your taxes doesn’t give you more time to pay your tax bill. Make sure you estimate and pay how much you owe in taxes by April 15, or you could receive additional penalties.
If you’re worried about the IRS or your state tax agency trying to collect your back taxes for the rest of your life, you might be relieved to know that this scenario won’t happen. In most cases, the agency has only 10 years to collect taxes. After a decade, the agency can no longer try to collect your back taxes by sending payment notices, issuing tax levies, or taking any other action.
However, it’s important to know that some actions, such as starting a payment plan or submitting an offer in compromise, can affect the 10-year window. Talk with a tax professional to make sure you understand your situation.
When you can’t pay all of your tax bill at once, you may be able to set up a payment plan so you can pay over time and avoid a tax levy. To request an installment agreement, use the IRS online payment agreement tool or submit IRS Form 9465. You’ll need to request either a short-term plan, which requires paying your balance in 120 days, or a long-term plan, which involves monthly payments over more than 120 days.
If there’s no way for you to pay your back taxes, based on your income and expenses, you can submit IRS Form 656 and make an offer in compromise that settles your back taxes for less than what you owe. Depending on your circumstances, you can pay a lump sum of 20% of your offer up front and cover the rest of the balance in five or fewer payments, or you can make periodic payments until you’ve paid the entire balance in full. Both payment options can help you avoid or stop a tax levy.
Keep in mind that the IRS can continue to take action against you while the agency evaluates your offer in compromise, however. Until your offer is approved, the IRS can file federal tax liens against your property, which gives the agency a claim to your assets.
If you don’t think the IRS should be able to issue a tax levy against your property or if you have a valid reason to disagree with the IRS’s decision, you can file an appeal. When you receive a tax levy notice from the IRS, call the number to arrange a CDP hearing. Consider contacting a tax attorney to guide you through the hearing process and assist with tax resolution.
When the IRS issues a levy, taxes and other back taxes can continue to pile up until you’re unable to pay any of them on time. If a tax levy has caused serious financial distress for your family, you may be able to apply to have the levy released. Call the phone number on the notice to explain your circumstances and learn about your options. The IRS may suggest a payment plan or other methods to resolve your tax levy.
If the IRS issued a tax levy based on incorrectly reported items or income that your spouse omitted from your return, you may be able to apply for innocent spouse relief. You could be eligible if you didn’t know about your spouse’s omissions or if you had no reason to know about the issues. Either way, seeking innocent spouse relief can lead to the IRS releasing any tax levies on property that you own.
If you’ve exhausted all other options, filing for bankruptcy could eliminate a tax levy and some or all of your back taxes. In most cases, tax levies are released within 24 hours of filing for bankruptcy. If you file for chapter 7 bankruptcy and your back taxes is at least three years old, you aren’t guilty of tax evasion, and your tax return wasn’t fraudulent, you may qualify to have your income back taxes discharged.
Dealing with a tax levy on your own can get overwhelming quickly. Since stopping a tax levy can be complicated, it may be in your best interest to hire an experienced tax firm to handle the situation for you. Since it isn’t always easy to know which tax firms you can trust, we’ve compiled some companies with excellent reviews and expertise with stopping tax levies. Take a look at the tax firms below to find one that meets your needs.
With its experienced staff of tax attorneys, certified public accountants (CPAs), and enrolled agents (EAs), Community Tax can assist you with anything from releasing tax liens and levies to handling incorrect filing issues and dealing with past-due returns. Since Community Tax operates in all 50 states, the firm’s knowledgeable staff can assist you, no matter where you live in the United States. The firm has resolved over $400 million in back taxes and closes cases in an average of just four months, so you can anticipate an efficient resolution when you work with Community Tax.
With its 8.4 Solvable score, 133 customer ratings and A+ rating from the BBB, it’s clear that Honest Tax succeeds in its efforts to provide honest, reliable tax help. This firm has 50 years of combined experience with tax concerns and offers a wide range of expertise, from resolving federal and state back taxes to handling tax levies and small business tax matters. Since Honest Tax provides free consultations and complimentary initial investigations, you can set your wallet aside and feel good about working with this firm.
If you’re dealing with a tax levy related to a business tax filing, Enterprise Consultants Group can help. This firm handles a wide range of tax and small business issues, and its tax attorneys and EAs specialize in business tax matters. Whether you need an offer in compromise, an installment agreement, or criminal tax defense, Enterprise Consultants Group can help you find an efficient resolution.
As a leading expert in releasing tax levies and liens, Hurricane Tax is a smart pick for taxpayers dealing with potentially serious issues. Unlike some firms, Hurricane Tax offers services to taxpayers who haven’t yet been contacted by the IRS, which means the firm can help you get a head start on understanding your options. Since the firm typically resolves cases in two to six months, you won’t have to wait forever for a resolution either. Hurricane Tax’s 7.6 Solvable rating and numerous four-star customer reviews can give you additional peace of mind when you work with this firm.
J. David Tax Law
Unlike many other tax firms, J. David Tax Law doesn’t have a full staff of CPAs and EAs. Instead, this firm employs experienced tax attorneys, which means its services are designed for complex issues like tax levies. J. David Tax Law has been in business for five years and boasts an A+ rating from the BBB along with a Solvable rating of 9.2 and dozens of four- and five-star reviews from customers. When you hire this firm, you can get started with a free consultation, and you can set up a payment plan to handle costs if necessary.
Whether you’re based in the U.S. or you live abroad, Optima Tax Relief can assist with issues like releasing tax levies and representing you during audits to preparing back tax returns. This firm’s signature two-phase process is designed to offer fast back tax assistance, as its experienced tax representatives can investigate your case and proceed with the optimal resolution in as little as 12 weeks. Optima Tax Relief has an 9.0 Solvable rating and an A+ rating from the BBB, so you can trust that this firm has what it takes to resolve your tax issues.
With its A+ BBB rating, 9.3 Solvable rating, and dozens of five-star reviews, StopIRSDebt.com is one of the best-rated back tax assistance firms you’ll find anywhere. Over the course of 10 years in business, this tax firm has resolved millions of dollars in back taxes, including cases dealing with tax levies, wage garnishment, and spousal issues. StopIRSDebt.com employs EAs to negotiate with the IRS on your behalf and tax attorneys to handle more complex legal issues, so you can feel confident that the firm can deal with tax matters large and small.
Altogether, Tax Law Advocates has over three decades of experience resolving back taxes with special experience in stopping tax levies. The firm’s knowledgeable tax attorneys, CPAs, and EAs can assist with issues ranging from stopping wage garnishments to representing taxpayers during an audit, so they can handle matters of all sizes. Tax Law Advocates A+ rating from the BBB, dozens of stellar customer reviews, and 7.1 Solvable rating demonstrate just how successful this firm is at helping taxpayers like you deal with both state tax agencies and the IRS.
When you want to work with a highly rated company that puts customer service first, W Tax Group is an excellent choice. This tax firm employs experienced tax attorneys who can help you with issues ranging from tax levies and bank levies to wage garnishments and tax liens. You’ll start with a free consultation, and your representative will walk you through the firm’s signature three-step tax resolution process: analyze, investigate, and resolve. Since you won’t be charged until your case is in the investigation phase, you can rest assured that working with W Tax Group won’t break the bank.
Although it’s been in business for just two years, Alleviate Tax has already become Better Business Bureau (BBB) Accredited and earned a Solvable score of 6.0. Our rating reflects both customer reviews and opinions from tax experts, so this firm’s score indicates its success with resolving back taxes quickly and effectively. Alleviate Tax has experience with releasing tax levies, stopping wage garnishment, negotiating offers in compromise, and setting up installment agreements. Since Alleviate Tax offers free consultations, a generous refund policy, and payment plans, this firm is a smart pick for taxpayers dealing with persistent tax issues.
Whether you have a quick question or you want to learn more about your options, contacting the IRS or your state tax agency directly can be helpful. Follow the links below to connect with your state tax agency or the IRS about a tax levy or other tax issues.
Whether you’ve already received notice of an IRS tax levy or you’re concerned about the possibility, it’s important to take action quickly. An experienced back tax assistance firm can help you understand your options and pursue the most effective resolution on your behalf so you can put back taxes behind you once and for all. Find a back tax assistance firm that meets your needs, and get tax levy help today.