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A lot of people try their best to pay their back taxes. It is not quite as convenient to settle past-due taxes. Individuals who are far behind in the payment of their taxes tend to give the Internal Revenue Service (IRS) the opportunity to still collect what they owe. Nobody wants to get to their property only to realize that a tax levy has been placed on it. For individuals who have gotten a tax levy notice from the Internal Revenue Service and have been thinking about how to resolve the tax levy, there are various options for you to consider in your quest to resolve a tax levy. In this article, we will be discussing all you need to know about an Internal Revenue Service (IRS) tax levy, how it affects your finances, and how to put an end to the tax levy in order to resolve your back taxes.
What Is an Internal Revenue Service Tax Levy?
There are various methods that the IRS uses in resolving outstanding back taxes that taxpayers owe. In cases where a tax levy is placed on your property, the IRS has every right to seize your properties, such as your retirement account, bank account, cash value for your life insurance policy, and even your wages. Tax debts are known to be one of the most difficult types of debt to resolve. This is why you need the help of a professional in your quest to resolve your tax debt. Also, in cases of a tax levy, it does not necessarily have to involve taking you to court and winning the case against you. However, a tax lien is referred to as a claim made by the administration in order to take custody of any of your properties.
What Are The Types Of Tax Levies That You Can Receive?
Various types of tax levies can be issued on your property by the Internal Revenue Service and state tax agencies. In situations where they want to collect back taxes, they make use of the easiest method possible. Some of the major tax levy definitions are:
Bank Account Levy
The agencies responsible for collecting back taxes have the ability to withdraw money directly from your personal bank account, as all they have to do is issue a bank levy. And in situations where the funds in your bank account cannot cover the total back taxes, these agencies have the right to withhold your money and with it, until you have finally settled your back taxes.
A wage garnishment is a type of tax levy in which the Internal Revenue Service works together with your employer in order to place a tax levy on your monthly payment. Following this type of tax levy, a particular percentage or amount of money is taken from your total paycheck for the month till you are able to settle all your back taxes. In cases where your employers do not cooperate, the company or industry in which you work will be held accountable for your back taxes.
In this case, your back taxes must have reached a minimum of about $50,000 before the IRS has the legal right to eventually size your passport. They seize your passport, which will prevent you from leaving the country until you have fully resolved your back taxes.
For individuals who are self-employed or are paid by a client rather than having an employer, the agency can still issue a tax levy known as the 1099 levy, as this enables the agency to withdraw money from any 1099 payment that you owe currently since a 1099 levy cannot be issued against upcoming payments.
A levy can be issued by the Internal Revenue Service against someone that owns significant assets. Anything can be confiscated, ranging from your house, cars, and any other property they can lay their hands on. Also, it can be extended to other financial assets such as commissions, dividends, retirement accounts, and many more.
Upon receiving a tax levy notice, there is absolutely no reason to be scared. Instead, ensure that you go through the notice thoroughly in order to fully understand your condition. And if you still can’t seem to understand, you can decide to hire a professional to help you with the whole process, and they can even try to negotiate with the Internal Revenue Service to reduce the balance owed to a reasonable extent.
How To Resolve An IRS Tax Levy
Getting a tax levy notice does not necessarily mean that there is nothing that can be done about the fact that the IRS might have to seize your property. However, there are various ways in which you can resolve your tax levy. Below are some of the ways in which you can resolve your tax levy without having to permanently lose your properties.
File For A Return Before The Due Date
One of the major ways in which you can avoid a tax levy is to consider filing all tax returns before the stipulated time. By adhering to the agency’s deadlines, there will be little or no penalty involved, or any other form of negative action, such as tax levies. In order to file within the stipulated time frame, ensure that you are conversant with all tax-related deadlines.
Request For An Extension
There are cases where you do not get to file your taxes on time, and this can definitely happen to anyone, especially in situations where you are just recuperating from a certain life challenge or waiting for essential tax forms. In any of these scenarios, you can always request an extension in order to avoid a tax levy. However, take note that getting an extension for filing your taxes does not necessarily give you extra time to pay your tax bill. So, ensure you have an estimate of your taxes and make payments in order to avoid receiving more punishment.
Claim Statute of Limitations
For individuals who are concerned about the Internal Revenue Service trying to receive their back taxes forever, you should be relieved to know that such a situation cannot happen. Generally, the agency has about 10 years to collect taxes, after which the agency has no right to collect back taxes in any manner. However, it is essential to know that certain situations, such as tendering an offer in compromise or starting a payment option, can negatively affect the 10-year time frame. Therefore, it is quite important to speak with a tax professional in order to know what steps to take and have an in-depth understanding of the whole situation.
Set Up an Installment Agreement
In situations where you are aware that you cannot make full payment of your tax bill at once, you may be advised to set up an installment agreement plan that enables you to make payment over a particular period of time in order. After setting up this payment plan, you might be required to choose either a short-term or a long-term payment. For a short-term plan, you will be expected to pay your bills fully in 120 days, while for a long-term plan, you will be expected to make a monthly payment for over 120 days.
Resolving a tax levy all by yourself can be quite overwhelming and challenging, as it can be really complicated to handle a tax levy. Therefore, ensure that you hire a tax professional who is adequately skilled in the field in order to help settle every situation that might arise along the way.