The Internal Revenue Service has various powers at their disposal to collect taxes that are owed and not paid, including the power to levy. A levy can result in the garnishment of income (such as your wages, salary, commissions, or other payments for personal services) and/or the seizure and sale of assets to satisfy outstanding tax debt.
Many have asked incredulously: can the IRS really take away a significant portion of my wages?!
They sure can. Fortunately, an IRS wage garnishment or wage levy is a tactic that is usually a last resort measure and is usually not done unless the tax problem has gone unresolved for quite some time after numerous attempts at notification.
When the IRS decides to levy your wages, the IRS will send written notice to your employer requiring the employer to withhold a portion of your pay and send it directly to the IRS. Your employer is obligated by law to follow these instructions or face serious penalties. If you’re self-employed, the IRS can send a IRS wage levy to your accounts receivable. In other words, they will send notice to your customers telling them to pay your accounts receivable directly to the IRS. This won’t be good for customer relations and can be quite embarrassing.
Furthermore, an IRS wage levy will generally remain in place until the tax liability is paid or other arrangements are made to satisfy the tax debt.
Be proactive! Make arrangements with the IRS before they garnish your wages.
Likewise, the IRS has the power to seize your house, your car or any other property you own. Once again, this is usually a last resort for the IRS. They will not seize your assets until they have given you proper notice and ample opportunity to pay your tax debt or work out a payment plan. (We will discuss payment alternatives in a future blog post).
Before the IRS conducts a property seizure, they will normally perform an investigation to determine the equity in the item to be seized. In almost all cases, the IRS will not seize the asset unless there is sufficient equity.
Due to governmental protections, except in extreme cases, it is unlikely that the IRS will consider seizing your principal home. However, rental properties or vacation homes are fair game and if there is sufficient equity in these assets, they can be seized without great difficulty. Businesses may be seized as well, but again, it is the exception, not the rule.
What to do if you get a Notice of Intent to Levy.
If you receive a Notice of Intent to Levy, you need to act fast! Either pay your taxes, if possible, or negotiate with the IRS. This is not the time for procrastination. This is the time to hire a tax attorney to represent you. The longer you wait, the more difficult it becomes and the more time and cost it will likely take to repair the damage that has already occurred.
If you’d like to consult with us regarding your options, we are available to help.