Notice of Levy: What Should You Do?
Notice of Levy: What Should You Do?
What is a Levy?
A levy is the legal seizure of your property to satisfy a tax debt. A levy is often confused with a lien. But levies are different from liens. A lien is a legal claim against property to secure payment of a tax debt, while a levy actually takes the property to satisfy a tax debt. A bank levy allows the federal government to take your financial and personal assets. A levy is placed against assets belonging to the taxpayer, known as a seizure, or it can levy assets from a third party such as a bank.
The 3 most common types of levies are:
- Bank account levy
- Wage garnishment on salary, and social security
- Asset seizure of personal property
What is a Bank Levy?
A bank levy is a legal action that allows creditors to take funds from your bank account. Your bank will be forced to freeze the funds in your account and hold them for 21 days before releasing them to your creditors to pay your debt. In order for a creditor to do this, they must first provide a request to your bank providing proof of a legal judgment against you. Some government creditors, such as the IRS, do not require court judgements.
A bank levy can be attached to a personal checking or savings account, as well as a business account. Once a levy is issued, it is difficult to remove and you will most likely need help from a debt settlement company.
What is Wage Garnishment?
Wage garnishment is a legal procedure in which a person’s earnings are required by court order to be withheld by an employer for the payment of a debt. The IRS can demand that your employer withhold a portion of your paycheck to be sent directly to the IRS. There will be a small portion left that will not be levied, but in most circumstances this portion is not enough to cover basic living expenses. This garnishment is continuous and can only be released by approval of the IRS or when the debt is fully paid.
What is Asset Seizure and What can the IRS take?
Asset seizure allows the IRS to take your personal property to pay off your debt. After your property is seized, it is sold to reduce the outstanding tax debt. The IRS is not required to go to court prior to issuing a tax bank levy and seizing your property.
Assets Subject to Seizure in a Levy:
- Cars, boats, airplanes, and luxury vehicles
- Cash value life insurance
- Accounts Receivable
- Stocks and bonds
- Your home and other real estate you own
- IRAs, Keogh, and other retirement accounts
- Pension or profit-sharing plans
- State income tax refunds
- Securities, contracts and promissory notes
- Dividends and rental income
- Licenses and franchises
- Pending inheritances
Typically, asset seizure occurs only after your IRS case has been assigned to a Revenue Officer.
Letters or notices of Levy
There are many different notices sent by the IRS informing taxpayers of an intent to levy. The IRS is required to give a taxpayer at least 30 days notice of its intent to levy on salary, wages, and other property.
CP 501 – This is a reminder notice that is sent before the notice of intent to levy. It informs the taxpayer of the unpaid balance and allows the taxpayer 10 days to respond before further collection action is taken.
CP 503 – This is the levy notice that follows the CP 501 reminder notice. It states that the balance is still pending and demands full payment within the following 10 days from the date of the notice.
CP 504 – This notice follows the CP 503 and states the intent of the IRS to issue a levy. If you have received a CP 504 notice it is important to act quickly. A debt settlement company such as CuraDebt can communicate with the IRS on your behalf before the levy is issued. After receiving this notice there is no more grace period.
CP 90/CP-297 – This is the final notice of intent to levy. If you have received this letter, your salary, wages, bank accounts, and personal property are at risk. The IRS will issue the levy 30 days after sending this letter.
CP 91/CP-298 – This is the final notice before the IRS places a levy on 15% of your Social Security Benefits. The IRS will give you a grace period of 30 days to contact them to discuss your debt.
CP 523 – If you have a payment plan (Installment Agreement) with the IRS, it is important that you stay on top of the monthly payments. The CP 523 notice is sent when a taxpayer misses a payment of their installment agreement, has a new balance due or did not file a tax return. The IRS will give you a 30 day grace period to respond to this notice before they levy your assets.
Form 668 – W – This Notice of Levy informs you that the IRS issued a levy to collect back taxes. This notice will also be sent to your payroll and/or bank, demanding that they withhold your funds and send them directly to the IRS.
You have received a Notice of Levy, What happens next?
If you have received any of these Notice of Levies, it is important to take action quickly. Hiring a debt settlement company can save you the stresses of dealing with the IRS on your own, and help you set up a resolution plan that works best for you, based on your financial situation.
Call us today for your free consultation. 1-877-999-0486