Did you know that the Internal Revenue Service is authorized to collect your overdue taxes through a levy? 
Just like any balance you owe a creditor, action may be taken if the balance becomes delinquent. Although the IRS is a not a creditor in the traditional sense, they do have a right under the 16th Amendment and Title 26 of the U.S. Code to collect tardy tax debts.

What is a levy?  A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt. 
If you do not pay your taxes (or make specific arrangements to settle your tax debt), the IRS may seize and sell any of your real or personal property that you own.
 
For example, they could seize and sell property that you hold (such as your car, boat, or house), or they could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, or the cash loan value of your life insurance).  In addition, certain federal payments may be subject to levy such as social security benefits and Medicare payments.

A levy is usually the last form of action the IRS will take after three requirements are met:
  • They assessed the tax and sent you a Notice and Demand for Payment;
  • You neglected or refused to pay the tax; and
  • They sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy. They may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested. If they levy your state tax refund, you may receive a Notice of Levy on Your State Tax Refund.
A levy will end when either the levy is released, you pay your tax debt, or the time expires for legally collecting the tax.

The best way to avoid levy action is to fully cooperate.  The IRS will not impose a levy if you cooperate.  It is also important to know that the statute of limitations does not apply to unfiled tax returns.  If you have not filed a return for numerous years, the IRS can go as far back as necessary to make sure that all of your returns are filed. The ten-year clock starts ticking once an actual amount is assessed by the IRS. The IRS has ten years to collect a debt, not ten years to hunt down your past-due returns. They can do this until you're old and gray.  Once your total tax has been assessed  you should arrange to make installment payments with the IRS before the window of opportunity closes.

Need some help with back payment of taxes? Contact us, we'll calm your fears.

 


Linda Smith and Maureen Sullivan
 
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