Information about the Federal Tax Levy

Wage levies and bank account levies are two of the primary methods that the IRS utilizes for tax debt collection. Getting notices for any of the two means that you are in serious danger with the IRS.

The IRS has the authority to levy your wages, including retirement income, social security benefits and other bonuses, if you incur substantial tax debts. In fact, the IRS can directly garnish your paycheck without having to go through a trial. A simple notice from them obliges your employer to transfer a considerable amount of your paycheck to the IRS. Full payment of total taxes due and a levy release are your only alternatives in ending wage garnishment.

The IRS can actually go after your clients if you are an independent contractor or self-employed and require them to pay a certain amount on your behalf. Although you will still get something from them, this amount is significantly less than the amount that you could have earned. Questions and clarifications about this issue can be answered by referring to the IRS Publication 1494.

Issuing a bank account levy is the IRS’ second primary method of collecting tax debts. This method allows the IRS to take all of your money in any of the bank accounts registered under your name. There is no use arguing with your bank as they will always say their hands are tied up and they cannot defy a government order. However, only funds that are in your bank account on the day the levy is received will be frozen by the banks. Hypothetically, if the bank gets the levy notice on a Tuesday and you deposit a check on Friday, the IRS cannot take the money deposited on Friday unless they have another levy

You have up to 21 days to get a levy release if the IRS enforces a bank account levy on you. If under any circumstance you can’t obtain the levy release or you simply do nothing, the bank will transfer the funds frozen in your account to the IRS. They can send up to the actual amount that you owe the IRS. However, issuing repeated bank levies allows the Internal Revenue Service to take more money from any of your bank accounts.

Wage and bank account levies are just among the collection methods adopted by the IRS. If worse comes to worse, they can also levy your personal belongings like jewelry, house, insurance policies and collectables. Hence, be sure to promptly pay all your taxes so the IRS will not impose a tax levy on your income and your belongings.

The Federal tax levy is a serious issue no matter how you look at it. For anyone who owes the IRS any amount in tax debt, it is highly recommended that they pay off those debts before the government uses more serious collection methods like wage garnishment and bank account levies.