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Understanding a Tax Levy
A tax levy is the legal seizure of a taxpayer’s assets by the Internal Revenue Service (IRS) or other taxing authorities to satisfy outstanding taxes owed. This action is one of the most severe collection mechanisms employed by the government and can significantly impact an individual’s or business’s financial situation.
The Process of Levying Assets
When taxes remain unpaid, the IRS may levy various assets, including bank accounts, investment accounts, wages, social security benefits, pensions, insurance policies, and physical assets. Unlike an IRS tax lien, merely a claim against assets, a levy involves taking assets to settle the tax debt.
How to Deal with a Tax Levy From The IRS
Dealing with a tax levy requires immediate attention. Taxpayers should consider seeking professional assistance from a licensed tax professional, such as an attorney, enrolled agent, or certified public accountant, who can guide the best action. This may include filing an appeal, negotiating a payment plan, or exploring options for a levy release.
Preventing a Tax Levy
Staying compliant with tax obligations is crucial to prevent a tax levy. This includes filing returns on time, paying taxes due, and responding promptly to any notices from the IRS. Sometimes, setting up an installment agreement or an offer in compromise may be a viable solution to manage outstanding tax debts and avoid levying actions.
Impact on Individuals and Businesses
A tax levy can have far-reaching consequences for individuals and businesses. It can lead to the loss of income, seizure of assets, and damage to financial stability. For businesses, a levy on accounts receivable or business assets can disrupt operations and impact the ability to meet payroll or other financial obligations.