The Basics of 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 or garnish your wages when you owe them a certain amount of money. Alternative sources of income such as retirement income, social security benefits and bonuses may also be garnished. In contrast to many other creditors, the IRS, representing the government, actually does not have to sue you in order for them to garnish your pay. They simply deliver a notification or serve the wage garnishment to the company you work for and inform them that they are now required to transfer a considerable amount of your paycheck to the IRS instead of you directly. They are ordered to do this until your tax debt is eventually paid off or until you have received a wage levy release, which frees you from this particular IRS problem.

The IRS obligates the clients of independent contractors and the self-employed to directly pay a certain amount of money to the former. Although the contractors will still receive a certain amount of money, this is considerably less than the normal income they get from their clients. The IRS publication 1494 is a useful resource regarding this matter.

The IRS may also impose a bank account levy and this allows them to take all of the money in any of the bank accounts under your name. Because this is a government mandate, 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 example, a levy obtained on a Tuesday will not affect new funds credited on a Friday. It is only when another levy is issued that funds in your account from Wednesday to Friday can be transferred to the IRS.

The law provides you with up to 21 days to convince the IRS to release the bank account levy. If you cannot get one within this prescribed period, the bank will immediately send your funds to the IRS. The amount of funds transferred to the IRS should be equivalent to the amount you owe but larger amounts will be collected if there are repeated bank account levies issued.

The government may utilize other less used but equally effective collection methods aside from a wage or bank account levy. The IRS can also levy personal assets like jewelry, your home, collectables, boat, insurance policies, ATV’s, account receivables and even airplanes should circumstances call for it. The point is, any tax levy is an IRS problem that will not go away until you have settled what the government believes is due to them.

The Federal tax levy is a serious issue no matter which way you look at it. Hence, it is highly advisable for anyone who has tax debts to settle them right away before the government enforces more serious collection methods like wage garnishment and bank account levies.

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