Tax levies are important for governments and other taxing authorities to collect unpaid taxes. A tax levy is a legal mechanism used to take property or money from a taxpayer to satisfy a tax debt. Understanding the meaning of a tax levy and how it may affect you is important. This blog will explain the basics of a tax levy, the circumstances that may lead to one, and how to avoid them.
What is a Tax Levy?
A tax levy is a legal action taken by a governmental agency or taxing authority to collect unpaid taxes from a taxpayer. Tax levies are typically used as a last resort when other attempts to collect on delinquent taxes have failed. The levy allows the agency to take property or money from the taxpayer to satisfy the tax debt. When a tax levy is imposed, the taxpayer’s wages, bank accounts, and other assets may be subject to seizure to collect the debt.
Tax levies may also be imposed on other entities, such as businesses, trusts, estates, and other organizations that have a tax liability. The levy is placed on the property or assets of the taxpayer and/or the organization responsible for the tax debt.
When is a Tax Levy Imposed?
A tax levy is usually imposed when other attempts to collect unpaid taxes have failed. The IRS or other taxing authorities may take the steps necessary to collect unpaid taxes, including issuing a Notice of Intent to Levy and a Final Notice of Intent to Levy. Once the Final Notice of Intent to Levy is issued, the taxpayer has 30 days to respond. If the taxpayer fails to respond or pay the debt within the 30-day period, the tax levy will be imposed.
What Property Can Be Seized with a Tax Levy?
When a tax levy is imposed, the IRS or other taxing authorities may seize a taxpayer’s wages, bank accounts, investments, or other property to satisfy the tax debt. The levy may also be placed on other entities, such as businesses, trusts, estates, and other organizations that have a tax liability.
The IRS or other taxing authority may also seize real property, such as land, buildings, or other real estate to pay the tax debt. The IRS or other taxing authority may also place a lien on the taxpayer’s property, a legal claim against the property that must be paid before the property can be sold or transferred.
How to Avoid a Tax Levy
Paying your taxes on time is one of the best ways to avoid tax levies. If you cannot pay the full amount of taxes owed, you should contact the IRS or another taxing authority to discuss payment options. The IRS or other taxing authority may work with you to set up a payment plan or other arrangement to pay the debt. If you have received a Notice of Intent to Levy or a Final Notice of Intent to Levy, it is important to respond to the notice and take the necessary steps to avoid the levy.