What is a Tax Levy and How Do You Prevent It?

At the mark of April 15, most people do one of three things: pay their taxes, file for a tax extension or avoid paying anything at all. For some, it can be financially difficult to pay the full tax amount they owe. However, consequences follow when dues aren’t paid for.

A tax levy is something that any American taxpayer hopes to avoid, but it can happen if you are past-due on your tax bills. It’s important to understand what exactly a tax levy is, how to prevent it from happening, and what you should do if you are faced with one.

What is a Tax Levy?
People often confuse the term “tax levy” with “tax lien,” but they are different penalties assessed by the IRS or your state’s Franchise Tax Board. A tax lien is a simpler legal claim by the government that will show on your credit report above all other creditors that you owe money to. A tax levy is a bit harsher: It is a legal seizure of your property by the government, which can include cash or anything else you own. They can take any assets you have to pay off your tax bills.

How to Prevent a Tax Levy
The best and most obvious way to avoid having a tax levy placed on your property is to pay your tax bills. The good news is that the IRS usually gives you plenty of time to pay, depending on the amount that you owe. Those who owe more will certainly be prioritized for collection. Different states have different levy procedures, so do your research to see if you owe money to your state’s Franchise Tax Board.

The IRS will not issue a tax levy until after an official tax bill has been sent (in other words, a Notice and Demand in writing). If that bill goes unpaid, you will receive two additional notices of nonpayment and what’s called a Notice of Your Right to a Hearing, which you will get 30 days prior to the levy. A Final Notice of Intent to Levy will also be sent before it is enforced. Many warnings will be issued to ensure that you pay your debt promptly.

What to Do if a Tax Levy is Imminent
You should do everything in your power to avoid a tax levy. Do not wait for any final notices to arrive. Pay what you can and the show of good faith may help you. Appeal your case in a hearing or simply reach out to the IRS and display your financial hardship. Arrangements for a payment plan could be made or they might even lower your bill in a compromise, as long as you show proper intent to cooperate.

Above all else, you should seek professional help when dealing with complex and potentially scary tax issues like a tax levy. Ferguson, Timar & Company can help you when it comes to arranging a compromise for unpaid taxes or fighting a tax levy. In the end, the cost for help from seasoned tax experts will save you more money and help you prevent a costly and intrusive tax levy from being assessed by the government.

For more information about tax levies and how Ferguson, Timar & Company can help, contact us today.