When you find yourself facing the IRS due to back taxes, you can become overwhelmed. The path you need to take to resolve a controversy that arises over back taxes can be unclear to the untrained eye. Here at Solvable, we recommend that you research the circumstances you are suffering and consider seeking out the help of a tax professional.
The IRS is capable of taking drastic measures to ensure that you pay your back taxes in full, such as tax levies. Filing your returns on time and paying any back taxes in full will help you avoid the unpleasant processes of the IRS. Let’s discuss what a tax levy is and how to obtain an IRS tax levy release should you experience this firsthand.
In short, a tax levy is when the IRS legally seizes your property or your rights to property with the intent of selling it to satisfy your back taxes. Usually, the IRS will implement a tax levy as a last resort. When you discover yourself facing an IRS tax levy, it is because of a specific series of events.
If the IRS assessed the taxes you owe and you receive a bill but refuse to pay the back taxes, you would be facing the potentially devastating force of the IRS. Next, the IRS will send you an official final notice of their intent to levy and of your right to request a hearing. You will receive these notices at the very least 30 days before the IRS implements the tax levy.
If a levy such as the ones included in the exemptions listed above is issued, the IRS will send you a detailed letter explaining the seizure and the rights you have to appeal once the levy has been issued. The IRS only communicates through the US Postal Service. So you may want to keep a check on your mail while having issues with the IRS.
Unpaid taxes can cost you more than you are willing to give up, but you may have no say in the matter depending on how dire the situation is. Promptly paying back taxes can prevent you from having to negotiate with the IRS in an attempt to maintain possession of your assets. Assets that the IRS CAN levy are your income, bank accounts, retirement, federal payments, houses, vehicles, and real estate.
There are assets that the IRS can NOT levy due to exemptions. Unemployment benefits along with specific annuity and pension benefits are exempt from a tax levy. Specific public assistance payments, disability payments connected to a service, and the revenue that comes from court-ordered child support are also exempt from a levy. Worker’s compensation from an injury and minimum weekly exempt income will not be levied.
The assistance that falls under the Job Training Partnership Act, schoolbooks, and clothing that is necessary will remain exempt from a tax levy. Mail that has not been delivered is exempt from a levy’s reach as well. There are specific amounts that are held from a levy, these amounts apply to fuel costs, provisions, furniture, personal effects in relation to your household, and books and tools for use in a trade, business, or profession. Certain limits may also apply to a primary residence and particular business assets in relation to a tax levy.
Once the IRS has begun to levy your assets, they will continue to do so until the tax deficit has been paid in full or you have taken the necessary steps to get the levy released. The best you can hope for is that the Statute of Limitations lapses beforehand. The IRS will not be able to issue a tax levy if the Statute of Limitations expires prior to its implementation. The release of a levy by the IRS is required if they determine the balance is met by a full payment from you or that the levying of your assets satisfies the back taxes.
The IRS is no respecter of where the payment of the back taxes comes from, so If the release of the levy will allow you to pay your taxes, they may allow for just that. If the IRS approves for you to enter into an installment agreement with terms that will not allow for them to continue imposing a tax levy, they will have to release the levy. If the levy itself is preventing you from meeting what the IRS considers to be reasonable living expenses, the IRS will consider releasing the levy.
If the value of the assets under the tax levy is more than the total tax deficit, the IRS may determine that the release of the levy will not impair their ability to secure the full amount of the back taxes and release the levy. If the IRS decides to release a tax levy on your property, you are still liable to settle the back taxes in full or make proper arrangements with them to resolve the back taxes, or they can reissue the levy.
The length of time it takes for the IRS to release a levy varies based on how complicated your situation is. It is always best for you to prepare for the long haul and to practice patience when dealing with the IRS. The soundest way to avoid a levy is to stay current on your taxes by paying what you owe before or by the time it’s due.
If you are unable to pay what you owe in full, you should pay what you can afford and then contact the IRS to let them know that you need assistance setting up a solution to resolve your back taxes. Doing your homework to resolve back taxes can pay off, but there are times when you may need help. Depending on the complexities of your circumstances with the IRS, we feel it would be in your best interest to connect with a tax professional using the services we offer at Solvable.