What You Need to Know About Federal Tax Levy

Wage levies and bank account levies are two of the prime methods that the IRS utilizes for tax debt collection. No matter which technique the IRS chooses to implement, both points out that you have a very serious IRS problem.

The IRS has the right to levy your wages, as well as retirement income, social security benefits and other bonuses, if you incur substantial tax debts. In fact, the IRS can directly garnish your paycheck without having to go through a trial. All they need to do is simply send your employer a notification and the latter is then immediately required to wire a substantial amount of your paycheck to the IRS. Full payment of total taxes due and a levy release are your only alternatives in ending wage garnishment.

In the case of independent contractors and the self-employed, the IRS can actually, in fact obligate the clients to pay a certain amount of money to them. Although the contractors will still receive a certain amount of money, this is significantly less than the normal income they get from their clients. The IRS Publication 1494 bears all the answers to any questions regarding this matter.

The second method, a bank account levy, allows the IRS to take all the money in any of your bank accounts. Because this is a government order, the banks will abide by this notice and it would be pointless to argue with them. However, only funds present in your bank account on the day the levy is received will be transferred to the IRS. For instance, a levy received on a Tuesday will not affect new funds credited on a Friday. Funds from Wednesday to Friday can only be garnished if another levy is issued.

When the IRS has a bank account levy on you, you are given 21 days to convince the IRS to discharge the levy. If for some reason you cannot obtain the levy release or you simply do nothing, the bank will transfer the funds frozen in your account to the IRS. They can send up to the actual amount that you owe the IRS. However, issuing other bank levies permits the Internal Revenue Service to take more money from any of your bank accounts.

Wage and bank account levies are just among the collection methods utilized by the IRS. In rare cases, they can also levy your personal belongings like jewelry, house, insurance policies and collectables. Hence, be sure to promptly pay all your taxes so the government will not enforce a tax levy on your income and your belongings.

The Federal tax levy is a serious issue regardless of which way you look at it. Therefore, it is highly advisable for anyone who has tax debts to settle them immediately before the government makes use of more serious collection methods like wage garnishment and bank account levies.