If you owe money to the IRS for back taxes or for other reasons and don’t pay the amount due on time, they can take possession of your assets in order to pay the debt. Once the debt is paid, the IRS will release the levy, but they have complete access to all of your assets in the meantime.
IRS Collections
When the IRS issues a tax levy, they jump to the front of the line before all of your other creditors. They are able to take payment from your assets for themselves, even if it means you won’t be able to make payments on other debts. Your assets can include your paycheck, your bank accounts, your investment accounts, your home, and any other property you own. As part of a tax levy, the IRS can require your employer, your bank, and others to make payment directly to them, without you ever having possession of your resources. Your employer or bank must comply with tax levy orders or face stiff penalties.
Avoiding a Tax Levy
Once a tax levy is in force, it’s very difficult to put a stop to it. It’s much easier to avoid a tax levy in the first place if you can. As soon as the IRS informs you that you owe a debt to them, you need to begin the process of working out an arrangement with them. Contact them right away to work out a payment plan. If you disagree with the debt or with the amount owed, contact the IRS right away to discuss your concerns. If need be, hire an attorney to handle your case for you and resolve the issue. If you ignore communication from the IRS and try to avoid paying, you’ll end up with a tax levy and you won’t have any choice.
Stopping a Tax Levy
The IRS is required to notify you that a levy will be enforced before they actually seize your assets, so it probably won’t come as a big surprise. If a levy is already in place, it won’t end without intervention or until the balance owed to the IRS is collected. You may be able to work out other arrangements with the IRS and have the levy released, but this is difficult to do at this stage. The IRS has already found you unwilling to pay by this time and may not be very amenable to altering the agreement now. Hiring a tax attorney to help with your case is your best bet once the tax levy is in place. They can attempt to negotiate other terms of repayment with the IRS, settle on a lower repayment amount, or address disputes or disagreements you may have with the IRS. Chapter 3 bankruptcy is an extremely effective tool to stop the IRS from executing a levy. But Chapter 3 doesn’t just stop with that, in many cases it can reduce the levy and eliminate other portions of the tax you owe.