For those people who do not receive a tax refund, but actually owe the IRS money, the idea of a tax levy being placed on them can be crippling. If you believe that this may happen to you this tax year, then find a qualified tax professional like Larry Gurewitz to help. He can help you find all of the appropriate deductions and tax credits to reduce your overall bill.
Most people do not intend to wait so long to pay the IRS that the IRS has to set up a levy on them, but good intentions left unresolved can have some dire financial consequences.
A tax levy is a response from the IRS from not paying a tax bill. A levy gives the IRS the legal right to seize assets or garnish wages to satisfy a tax liability. The IRS will take into account any form of financial assets in order to retrieve the funds, such as savings and checking accounts, investments, pension, or inheritances that you are due to receive. Having all of these things restricted or seized can completely change a person’s standard of living.
The IRS is required by law to keep the person experiencing the unpaid taxes well informed of the situation. The taxpayers will receive three different types of notices:
The majority of the time, these notices will come in the form of five different letters. If the taxpayer receives the last letter and doesn’t respond by paying the balance or by making arrangements with the IRS to pay the balance such as a payment plan, then the IRS will place a levy by seizing assets in bank accounts and garnishing wages.
The first and possibly fastest method for avoiding an IRS levy is to submit an amendment of your tax return to the IRS. This may decrease your overall balance due or even erase your balance due entirely. Filing an amendment can be difficult, so find a tax professional to complete the appropriate paperwork. Your tax preparer can possibly find further deductions or credits that you missed with the first return that you submitted.
The second is to request and extension. The extension will solely allow you extra time to pay the balance in full. You are able to apply for an extension up to 120 days in order the avoid the levy. However, even 120 days may not be enough. It if is not, then you can request to establish a payment plan with the IRS. The IRS will not issue a levy as long as you stay current with the payment plan.
Another request that can be made of the IRS is to have them put you in the status of “Currently Not Collectible.” This status officially classifies you as not being able to pay, but only temporarily. The payment balance doesn’t go away but it is deferred for a small amount of time. Speak to a qualified tax professional that specializes in IRS levies to determine if this request would be beneficial to you.
The last method of trying to avoid a IRS tax levy is to work the IRS to establish an offer in compromise (OIC), this is a collection method that satisfies the taxpayer’s debt for less than the original amount owed and suspends levy action. This type of method is extremely rare because there are very specific requirements that the taxpayer must met in order to qualify. This type of arrangement may actually require the services of a tax or business lawyer.
You should be warned—do not attempt to work or trick the system. If the IRS deems you as attempting to delay a levy with no intent of payment, such as those taxpayers that own balances on multiple years, then you may be subject to a levy because of lack of good faith.
Once an account is paid in full, the IRS will stop any collection activities. However, in terms of your personal finances, it is important that you receive a letter or another official form stating that you have paid the balance in full and you have been released from any future collection activities.
Seek out a tax preparer and advisor that not only handles federal tax returns but also is familiar with the state that you are filing. Some state tax credits can be applied to your tax bill and your tax preparer can tell you all about these. If you are in the Los Angeles area, seek out Larry Gurewitz, an experienced tax professional. Click the profile link below for more information use the Contact button to get started.
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