If you are struggling to pay your tax debt, you may find yourself getting a tax levy against your assets. The IRS can put a tax levy on your assets, including your bank account, if you have unpaid taxes. Thus, it is important for you to pay your taxes on time.
So what do you do if you find yourself under a tax levy? There are several relief options available to you. Here are four practical tips to managing an IRS tax levy.
Apply for a Levy Release
The IRS is required to give you 30 days notice before applying a tax levy. Once the 30 days is up, the IRS can liquidate your assets to pay your tax debt. They can use money from your bank account to do so as well.
You should apply for a levy release immediately to avoid the IRS controlling your assets. The IRS is required to lift the levy under specific circumstances. You can pay the balance of your tax debt, thereby removing the need for the levy.
You can also provide proof that the statute of limitations has expired on your tax debt before the IRS issued the levy. You can initiate an installment agreement to pay off your debt.
Economic Hardship
If you can prove that the levy creates a level of financial crisis that prevents you from covering standard living expenses, the IRS will remove the levy. Proving this may be difficult, but not impossible.
You may have recently lost your job, or suffered an injury or illness that prevents you from earning an income. You may need your current assets to survive. If you can provide proof of this, the IRS may release the levy, and may forgive some or all of the debt.
File an Offer in Compromise
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If you truly are in serious financial distress, an offer in compromise can help. You must create an offer that is both affordable to you, and acceptable to the IRS. The IRS will only accept an offer if it believes it is more that what it might reasonably expect to collect considering your financial condition.
You can offer a lump sum offer in compromise or you can offer a 20% down payment with periodic installments until the balance is paid. In either case, you are settling for less than what you owe.
Hire a Professional Tax Resolution Service
Hiring a professional to handle a complicated situation like a tax levy is sound advice. They can review your finances, create a plan, and file all the necessary paperwork with the IRS to get you on the road to financial recovery.
Not all tax attorneys are created equal, so be sure to hire the right tax professional. Make sure he or she has experience with your situation. That experience will translate to a more efficient process and ultimately a quicker resolution.
A tax levy can cause serious financial problems, even if you have assets and a full bank account. It is important to act quickly to get the levy removed before the IRS takes control.