Everything You Need to Know If An IRS Levy Is In Your Future
IRS levies have become very popular across the states. Every year, IRS – which is the most powerful debt collector in the US – send millions of levy warnings and notices to different taxpayers all over the nation. And now you’ve become a part of the statistics and you feel like the world is coming to an end. Especially the thought of losing your property and/or assets. Good news is, there are actions that you can take to prevent the levy from progressing. But first, let’s understand how an IRS tax levy works.
How a Tax Levy Works
Before a tax levy is placed on your property/assets by the IRS, a lot of events must first occur. You should first receive a “Notice and Demand for Payment” which is sent to you after making their tax assessment. Here, you’ll choose to neglect or refuse to make payments of the tax balance stated on the notice. The IRS may send this notice twice and if nothing happens, you’ll receive the levy notice, a “Final Notice of Intent to Levy and Notice of Your Right to A Hearing” which you’ll be given 30 days to respond. A tax levy will then be placed on your property/assets if you’ll not have responded to the IRS within the 30 days of sending the levy notice.
Releasing the Tax Levy
While tax levies can be challenging and stressful, releasing the levy could be your best short right now. You have the right to appeal for this release hence preventing the levy from progressing. To learn more about IRS levies and the necessary steps to take, you may check the Publication 1660 or consult a tax relief professional who has a proper knowledge of the process in case you need additional help. The following are some of the ways that you can apply to prevent the levy.
- Paying in Full
This is the surest and fastest way of preventing tax levy and avoiding problems with the IRS. If your personal finance is enough to pay off the taxes due, go for the option. This may mean digging into your savings. You can also consider other possible ways of outsourcing the funds such as borrowing from family and friends, taking out a loan with reasonably low rates – than what the IRS would charge for interest and penalties, of course. Another unfriendly situation is where you might be forced to sell off some of your assets/property to pay the tax debt and avoid getting into serious trouble with the IRS concerning the debt.
- Proving Tax Identity Theft
Someone could have stolen your identity and used it to request a refund by use of inaccurate credits or deductions. They could’ve also used it to collect W2 wage income or 1099 income in some instances where your employer doesn’t withhold taxes. Should you find yourself in any of these situations, you should ask for identity theft and provide proof. Consult with your tax relief professional to help you collect all the necessary proof and to help you prove them to IRS.
- Submitting an Offer in Compromise
The offer in compromise (OIC) refers to the collection alternative that you can use to settle your tax debt with the IRS for an amount that’s less than what you owed besides suspending the actions of the levy that was to take cause. The odds for being accepted to go with this option, however, can be very minimum. In fact, several taxpayers who haven’t paid their tax balance do not meet the strict requirements to qualify. You’ll be lucky if you’ll be accepted as this will relieve you of the possible loss of assets/property. However, if you’ll not be accepted, it’s not the end of everything. You can still arrange for an alternative agreement as explained below.
- Agreeing to a Payment Plan
A payment plan can either be full installment agreement or a partial payment installment agreement. Installment agreement allows you to make monthly payments towards settling your tax debt over a certain period of time which you’ll agree with IRS. Normally, this time period should not exceed the 84th month. This doesn’t mean your interests will not continue to accrue, because it does. But if you keep paying for the tax debt on time and the agreed amount, you’ll be able to benefit from a reduction of the penalty charged for failure to pay the debt balance, by 50%.
With a partial payment installment plan, you’ll be allowed to pay what you can afford by the end of every month. But this plan will be accepted after the IRS has reviewed your financial situation and have come up with a fair amount that you’ll be required to pay on a monthly basis. Collection activity is normally expected to stop with this plan, in most cases.
- Submitting Proof of Financial Hardship
This is well known as a Currency Not Collectible (CNC) status. Here, you’ll need to provide proof to the IRS that you’re currently facing financial hardship or that you’re bound to suffer the hardship should the IRS proceed with the levy. You can be placed in this status if you won’t be able to pay for the tax debt and still meet basic living standards. Collection activity is also bound to stop once placed in this status but the penalties and interests will continue to accrue.
- Innocent Spouse Relief
In most instances, both spouses file tax returns together and are, therefore, jointly liable for the debt. But this may not always be the case since some spouses, though very rare, tend to be “innocent” about what their partner is doing. This means that you can qualify for relief hence preventing the tax levy from progressing if you can prove you were “innocent” and should not be liable for the debt. Besides proving your “innocence”, there are other requirements that you’ll have to meet as well. Your tax relief professional will guide you through this.
If an IRS levy is in your future, it’s not the end of life. There are different actions that you can take, as explained above. But you need to act fast lest you’ll face the harsh collection method. In most instances, taking some of the prevention actions can be challenging and too involving. Hiring a helping hand from a reputable tax relief professional can be the most effective option that you can take to increase your chances of stopping the levy from progressing within the shortest time possible. You can also look out for other relevant themed blogs to learn more about IRS tax levy and different ways to go about it. Good luck!