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Tax Matters, Inc. | 220 Thunderbird, Suite R | El
Paso, Texas 79912
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Threat of
Levy and Levy Releases When the IRS commences a levy action, it is as a last resort. Communications between the taxpayer and the Service have broken down and the IRS does not know what the taxpayer intends to do about unpaid taxes. The levy is a demand made by the Service on a third party; an employer, a bank, a brokerage house or anyone else they can locate that has possession of assets owned by the delinquent taxpayer. Far and away the most common levies or garnishments is on salary and wages, and bank accounts. There are differences in the nature of the levies on these asset classes. Wage levies are continual. Once in place the employer is obliged to continue to withhold wages until the levy is satisfied or the levy is released. Currently the IRS may withhold all wages due above $3.83 per hour for a single individual with no dependents. That is far below the minimum wage. The taxpayer is liable for income tax on the full amount paid and withheld. As with a bank levy, the employer is obliged to hold the funds until 21 days from the date of levy have gone by, not counting the day the levy was received and implemented. In the case of a bank levy on a time deposit, the bank must deduct the 10% penalty for early withdrawal if it applies and remit the balance to the IRS. It is very difficult to retrieve funds impounded by the employer or financial institution. It can be done, but in most cases that will require the intervention of the Taxpayer Advocates Office, a subject found elsewhere in this web site. The levy will be satisfied when all tax, penalty and interest is paid if full, or when the IRS withdraws the levy order. The levy order may be withdrawn when the Service is satisfied the taxpayer is attempting to comply with his/her tax obligations. Compliance with that tax obligation may be by paying the tax, entering into an installment agreement, submitting an Offer in Compromise or being placed in non-collectible status (because the taxpayer does not have enough money to pay the back taxes). A levy may result in the individual being unable to make mortgage payments or pay the rent or car payments. Consequently, any correspondence received from the IRS or any tax agency that mentions a levy or seizure of assets should be given immediate urgent attention. |
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Disclaimer TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE IRS, WE INFORM YOU THAT ANY TAX ADVICE CONTAINED IN THIS COMMUNICATION (INCLUDING ANY ATTACHMENTS) WAS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF (1) AVOIDING TAX RELATED PENALTIES UNDER THE INTERNAL REVENUE CODE OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
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