- 27 Feb 2023Zenefits Review
A tax levy is a collective process to legally seize properties and satisfy an outstanding tax debt when an individual fails to pay taxes on time. A tax levy is different from a tax lien, as a lien is a claim the government has against property to secure tax debt payment. A levy is actually seizing the property, and the government can seize and sell them to pay the taxes.
The IRS or a bank may seize the following properties as levies:
Before the IRS can issue a levy, five events take place, leading to the seizure of the assets.
Various types of levies exist depending on the type of action a debtor has committed. However, when it comes to seizing the properties of an individual, tax levy, bank levy, 1099 levy, garnishments, and seizing of the passport can take place. The government can issue levies to encourage environmentally friendly practices as well and to use funding for parks or school districts.
The Internal Revenue Code, or IRC, authorizes levies for the government to collect and pay outstanding taxes. To make it happen, the IRS must first send the taxpayer at fault a final notice about levy and a notice for a court hearing thirty days before the levy takes place.
Both tangible and intangible things can be levied. The IRS will collect physical assets the taxpayer owns and uses, and any property that’s intangible or used by someone can also be seized, such as bank accounts, licenses, rental earnings, retirement plans, etc.
If an individual owes payments to a creditor, the creditor can request that the court issue a bank levy. The bank will then freeze the debtor’s bank accounts and have the debtor pay the outstanding amount fully. A creditor can issue a request for levy as many times as needed, as it’s not a one-time action.
The IRS will contact the employer of the taxpayer at fault to withhold a certain percentage of their employee’s taxes. They’ll do so until they can collect enough to satisfy and pay off the outstanding tax, along with penalties and interests.
This levy applies to contractors who have certain amounts owed to them. The IRS will seize all bank accounts and properties until they can satisfy the tax amount.
If a debtor has over $50,000 in outstanding tax, the IRS can request that the state department seize passports until the debtor pays off the outstanding amount. They also have the right to deny the passport during this period.
If the taxpayer doesn’t pay the due taxes or make arrangements to settle the debt within the thirty days after getting the final notice and the notice for the hearing, the IRS decides to do the levy. They will then seize all the properties the taxpayer owns that have an interest in or are used as a guarantee against debts.
The IRS can directly seize physical properties, such as vehicles, houses, rental houses, and other real estate properties. They can levy assets and have third parties collect them, such as dividends, bank accounts, investment accounts, retirement plans, insurances, etc.
The only way to avoid facing a levy or even getting a levy notice from the IRS is to be responsible with your taxes and payments:
Although the most responsible thing to do to stop getting a levy is to pay off the tax debts on time, you can still reverse a levy within the time period you get if you have already received a notice. There are also certain conditions that will help you keep off the levy.