Key Takeaways

When you owe taxes to the IRS, they can use a tax levy to seize your money. This can include garnishing wages, seizing assets, and more. To prevent a tax levy, you can pay your tax bill in full and on time, set up a payment plan, or consider an offer in compromise if you can't afford to pay.

How Does a Tax Levy Work?

If you owe money to the IRS, they can use a levy to collect it by seizing assets. Before doing so, the IRS will provide warning. To prevent a levy, keep in touch with the IRS, update your address, and communicate any financial problems. If you receive a "Final Notice of Intent to Levy and Notice of Your Right to a Hearing," contact the IRS immediately.

Examples of a Tax Levy

A tax levy allows the IRS to collect money you owe through methods such as bank levies, wage garnishment, property seizure, and reduced tax refunds. The IRS can also find other ways to collect money if you don't have liquid cash to pay off your tax debt.

Can a Tax Levy Be Released?

You can appeal a tax levy to prevent it from moving forward. The IRS may release a levy if you pay off your tax debt or if having the levy in place would create extreme financial hardship for you. However, you will still need to address the tax debt eventually.

Tax Levy vs. Tax Lien

A tax levy is a legal seizure of assets, while a tax lien is a legal claim against property for future payment. Unlike a tax levy, a tax lien is a public record that could impact your credit report.

How To Prevent a Tax Levy

To prevent a tax levy, you can pay your tax bill over time through a payment plan with the IRS or negotiate a settlement through an offer in compromise. This allows you to pay less than your full tax bill based on your financial situation.

Frequently Asked Questions (FAQs)

To remove a tax levy, contact the IRS and request its release. If the IRS denies your request, you can appeal. You may also qualify for a levy release if you've paid off your debt, have an installment agreement, or if releasing the levy would help you pay your taxes.

If you are worried that you may have a tax levy, look out for the "Final Notice, Notice of Intent to Levy and Your Right to a Hearing" from the IRS. Contact the IRS immediately if you receive this notice.