Tax Levy: What It Is, How It Works and How to Stop One

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What is a tax levy?
- Federal: $79 to $139. Free version available for Simple Form 1040 returns only.
- State: $0 to $69 per state.
- Expert help or full service filing is available with an upgrade to Live packages for a fee.
When will the IRS issue a tax levy?
- The agency calculates the outstanding tax and sends the taxpayer a "Notice and Demand for Payment."
- The taxpayer fails or refuses to pay the outstanding tax.
- The agency then sends the taxpayer two additional documents — a "Final Notice of Intent to Levy" and a "Notice of Your Right to a Hearing" — at least 30 days before the levy is issued. These documents are either transmitted in person or sent to the taxpayer's home, last-known address or place of business. If the agency levied a state refund, these notices might be sent after the levy is issued.
- The IRS sends the taxpayer advance notice that it may begin contacting third parties (i.e., employers, banks, friends, neighbors) to collect information about the taxpayer's tax liability.
How a tax levy can affect you
- Your paycheck may shrink. Wage garnishment is a common tactic. If your wages are garnished as a result of a tax levy, this means your employer must submit a portion of your earnings to the IRS every payday.
- Your bank accounts could be frozen. Bank accounts are prime targets for recouping back taxes. Typically, the IRS contacts your bank and places a 21-day hold on your account. If you haven’t worked things out with the IRS after that time, the bank may send some or all of your money to the IRS.
- Your house could be in jeopardy. The IRS can also seize certain personal properties, such as a home or a car. Some items can’t be seized, though. For example, the IRS says it can’t seize unemployment benefits, certain annuity and pension benefits, certain disability payments, workers’ compensation, some public assistance payments or child support payments. Undelivered mail, some items necessary for school or work, and certain furniture and household items are generally off the table, too
.
- Federal: $79 to $139. Free version available for Simple Form 1040 returns only.
- State: $0 to $69 per state.
- Expert help or full service filing is available with an upgrade to Live packages for a fee.
How to get rid of a tax levy
Article sources
- 1. IRS. Levy.
- 2. Legal Information Institute (Cornell Law School). 26 U.S. Code § 6334 - Property exempt from levy.
- 3. Internal Revenue Service. Understanding a Federal Tax Lien.
- 4. Internal Revenue Service. 2022 Data Book.
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