Being at the receiving end of an IRS tax levy can be an overwhelming and scary experience. Don't despair, though, because you have options for dealing with this common issue. You can take concrete steps today to handle an IRS tax levy effectively.
A tax levy is a procedure that the IRS can use to collect tax money that you owe. Levies can work in several ways, including by taking funds from your bank account, garnishing your wages, seizing property you own, reducing your future tax refunds, and several other options.
If you are facing an IRS tax levy, start the process of handling it with these critical steps.
Contact the IRS Right Away
Contact the IRS right away to request a levy release and to resolve your tax liability. The IRS can release a levy for a number of reasons, including if it would cause you immediate economic hardship. You also have the right to appeal if the IRS denies your initial request to release a levy, either before or after the IRS has placed the levy.
Take a look at Publication 1660 online to learn more about how to complete an appeal.
Prevent a Levy
Once you have been notified that the IRS will place a levy, there are steps you can take to prevent it. Pay your taxes back in full, including any accrued interest and penalties. If you are not able to do so right away, get in touch with the IRS to learn about what other options you have. You can also speak to a local attorney or credit counselor to learn more about your options and get advice on your specific situation.
Get an Extension on Your Taxes
You do not always have to pay your tax bill by April. It is possible to apply for and receive an extension on filing your taxes or to set up a payment plan with the IRS that allows you to pay back what you owe over an extended period of time. Formalizing such a plan with the IRS demonstrates to them that you are making a good-faith effort to pay back what you owe.
It is also possible to negotiate with the IRS to settle your debts. If you make an offer that the IRS accepts, you may be able to pay back less than the full amount that you currently owe.
Avoid Future Levies
Avoiding levies in the first place is the best way to deal with this problem. Make sure that you file your tax returns on time (or apply for an extension if you cannot) and pay your taxes before the due date. If you cannot pay back the total amount you owe, pay back as much as possible and work with the IRS to resolve the remaining balance.
The key to dealing with an IRS tax levy effectively is to be proactive. Take these steps to ensure that you deal with any potential levy in a timely manner.