No matter how diligent you are, it is all too easy to fall behind on your taxes. Whether you encounter financial difficulty or have another reason for an outstanding tax debt, your most immediate concern may be how you’ll manage to repay your tax debt. If you fail to pay the Internal Revenue Service (IRS) or work out a payment arrangement, then the IRS may make the decision for you by imposing a tax levy.
A tax levy is an extreme step that occurs when a taxpayer fails to respond to repeated notices of outstanding tax debt. Through a levy, the IRS can legally seize your personal and business assets, including money in your bank accounts, your vehicles, and even your real estate. The best way to avoid having a levy imposed is to work with a Virginia Beach tax lawyer who can help you determine if you are eligible for an alternative arrangement, such as an installment plan or an Offer in Compromise (OIC).
At Poole Brooke Plumlee we represent individual and business taxpayers with the IRS and the Virginia Department of Taxation. For each client, we develop a comprehensive strategy to resolve their tax issues based on their unique financial situation. To learn more, reach out today to schedule a consultation with a member of our team.
When Does the IRS Issue a Tax Levy?
Federal law allows the IRS to impose a levy on a taxpayer to satisfy a debt. A levy is a legal seizure of your property. It is different from a tax lien, which is a legal claim against property to secure payment. In other words, the IRS may impose a lien against your property, and then issue a levy to actually seize the assets in question.
The IRS will not issue a tax levy immediately. Instead, it will typically only levy after:
- The IRS sent you a Notice and Demand for Payment;
- You did not pay the tax due or otherwise make arrangements to pay.
- The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before the levy.
- The IRS sent you advance notification of Third Party Contact notifying you that the IRS may contact third parties regarding the determination or collection of your tax liability.
By the time you receive a final notice, you will have received multiple notices about your outstanding tax debt. If you do not respond to these notices, the IRS may take the next step of imposing tax liens and levying your assets. For this reason, it is critical that you pay attention to any notices that you may receive from the IRS and reach out to a Virginia Beach tax attorney for advice as soon as possible.
What Assets Can the IRS Legally Seize Through a Tax Levy?
If the IRS issues a levy, then it can legally seize almost any asset that has value and that can be liquidated into cash to settle your tax debt. This may include anything from investments to jewelry to real estate. In most cases, these items will be sold at a public auction to satisfy your tax debt.
Among other assets, the IRS may legally seize and sell:
- Life insurance policies
- Savings and checking accounts
- Retirement accounts
- Motor vehicles (including cars, trucks, motorcycles, and boats)
- Vacation homes
- Any real estate that you own in addition to your primary residence
- Jewelry
In addition, the government can garnish your wages, your federal and state tax returns, and even some government benefits. The IRS does not need a court order to garnish your wages, and it can take up to 100% of nonexempt earnings. Wage garnishment could last until your tax debt has been paid in full.
The IRS may garnish different types of income, including:
- Your paychecks
- Bonuses
- Social Security benefits
- Payments due from the federal government
As you can tell from these lists, asset seizure is an extreme measure that can seriously affect your life. If you have received a tax bill from the IRS or notice and demand payment, reach out to a Virginia tax lawyer for advice on how to handle the matter.
What Assets Cannot Be Seized by the IRS?
The IRS cannot seize assets that are essential to your survival and shelter. Generally, the IRS cannot seize certain property, including:
- Your personal residence, if your debt is under $5,000
- Wearing apparel and school books necessary for the taxpayer and their family
- Books and tools of the trade valued at $3,860 or less
- Personal effects and furniture with a value of $7,720 or less
- Court-ordered child support
While the IRS can technically seize a taxpayer’s personal residence (home) if you owe more than $5,000 in outstanding taxes, it is difficult to do so. The IRS typically only seizes a personal residence as a last resort. Taxpayers should be aware that it is legal for the IRS to seize your home, even if it is a rare occurrence.
In addition, if a levy on your wages or bank account is causing an immediate economic hardship, then it may be released. An economic hardship occurs when the IRS determines that the levy is preventing you from paying basic, reasonable living expenses. You must contact the IRS and provide financial information in order to request a release of the levy against your wages and/or bank accounts.
A levy release does not mean that you no longer owe the outstanding tax balance. Instead, the IRS will stop garnishing your wages or accounts. Instead, the IRS will work with you to establish a payment plan or take other action to pay off the balance of your tax debt.
Is It Possible to Protect Myself from an IRS Asset Seizure?
The best way to avoid having your assets seized by the IRS is by filing your returns on time (or requesting an extension) and paying your taxes when they are due. If you can’t pay the full amount, then you should pay as much as you can and work out an installment agreement with the IRS to pay the balance.
Most importantly, you cannot ignore billing notices from the IRS. Even if you cannot pay your balance in full, ignoring IRS notices may ultimately lead to asset seizure or other grave consequences. There are a number of options for resolving tax debt, such as payment plans, an Offer in Compromise, or even tax debt forgiveness for unusual situations. In some cases, it may even be possible to appeal the amount due.
Many people are unaware of these and other options for resolving tax issues. They may also be intimidated by the thought of dealing with the IRS. A seasoned tax attorney in Virginia Beach can help you through the process. They will review your tax returns and any notices sent to you by the IRS and develop a strategy for responding to the IRS. Your lawyer will also take steps to protect your asset from seizure by the IRS by working with the government to find a way to resolve your outstanding tax balance.
How Our Law Firm Can Help
When you receive a notice from the IRS, it is often tempting to throw it in a drawer and hope that the problem goes away. Unfortunately, the ostrich approach is not a good one – and will almost certainly lead to a situation where the IRS is seizing your assets and garnishing your wages. The best way to avoid this reality is to reach out to an experienced tax lawyer as soon as possible after receiving a tax bill from the government.
The attorneys of Poole Brooke Plumlee represent taxpayers throughout the Commonwealth of Virginia. We understand how challenging tax issues can be and are dedicated to helping individuals and businesses resolve them in a favorable manner. To learn more or to schedule a consultation with a Virginia Beach tax attorney, give our law firm a call at (757) 499-1841 or fill out our online contact form.
