Thursday, August 14, 2008

Notice of Levy

Question: I heard that the IRS can garnish your bank account if you owe back taxes, is this true?

Answer: The IRS does have the legal right to levy bank accounts and or wages. In addition to that they may choose to sieze and sell property such as cars, boats or houses. In order to do this the IRS needs to satisfy the following requirements:

* Assess an amount due.
* Notify the tax payer of the amount due via a certified letter (usually a number of letters).

If a tax payer neglects or refuses to the pay the tax liability, the IRS will send out a Final Notice of Intent to Levy (Form L1058) at least 30 days before the actual levy takes place.

A bank levy freezes the funds available at the time up to the total amount of the liability for 21 days. The bank is then required to "freeze" the funds for 21 days and then to forward the monies to the IRS.

Although the IRS can place several bank levies, this type of levy freezes the funds that are on the account at that time, any subsequent deposits are not levied unless a second levy notice is filed.

A wage levy, however, is a continuous levy until the taxpayer reaches an agreement with the IRS to resolve the tax liability.

As always, when a tax liability reaches this point it is important to consult with a competent tax professional about the different options.

1 comment:

Brian Watkins said...

It's also important for people to note the absolute importance of grappling with their IRS debt before a levy takes place. Levies can often be delayed with proper representation, but once one has been initiated it's very difficult to remove without a resolution agreement, which can take time.