What Is A Tax Resolution?
Tax resolution is a process that is handled by a tax resolution company to assist you with any debt that you have with the IRS. The goal is to minimize what you owe to the IRS as much as possible.
Tax resolution is usually needed when someone owes the IRS back tax and has put off paying it for a length of time. When the IRS runs out of patience, they will contact your bank in order to get a tax lien or bank levy to your property.
This allows the IRS to take your assets and use them as payment for the taxes that you owe them.
Signs Indicating an Impending IRS Levy
If you owe back taxes to the IRS, you may fear that a bank levy could be imminent. Fortunately, there are warning signs that can give you advance notice, allowing you to seek assistance from tax resolution firms.
A major indicator that a levy may be on its way is receiving a notice of action from the IRS, signaling their intent to proceed with the levy process. These notices are typically addressed directly to the taxpayer who has outstanding tax liabilities.
What is a Tax Levy?
Simply put, an IRS Tax Levy is the seizure of your assets to settle a tax debt. The IRS notifies your bank or employer, directing them to withhold a portion of your money or property. Typically, the IRS issues either Form 668-A or 668-W (for wage garnishment).
A tax levy primarily targets bank accounts and is a one-time event. When your bank receives the levy, funds in your account are temporarily “frozen.” This means the money is set aside for 21 days, during which you can arrange for its release to settle your tax liability.
During this period, your account generally remains accessible for your use, subject to your financial institution’s policies. However, subsequent deposits are not affected unless a new levy is issued.
Why Did This Happen?
If you owe back taxes, the IRS may issue a tax levy as a consequence of unpaid taxes. This situation affects many Americans annually, but it’s important to know it can be resolved.
What Can You Do?
When faced with a tax levy, there are several options for resolution, including negotiating adjustments and formal resolutions.
To release a levy, demonstrate how it causes hardship and provide evidence of your financial situation. Prompt action is crucial to prevent a levy from occurring. Understanding your options beforehand can simplify the process.
Notice of Intent to Levy
Receiving an IRS Intent to Levy Notice indicates serious delinquency in owed taxes and a lack of effort to resolve the issue. Before the IRS can seize property, garnish wages, or levy bank accounts and other assets, they are required by law to provide advance notice, typically at least 30 days before any action is taken. This notice must:
- Be provided in writing
- Explain the reason for the levy, the seizure process, and the taxpayer’s options
- Be delivered in person or sent via registered mail
There are exceptions to the 30-day notice rule, such as state tax refunds, situations where tax collection is deemed to be in jeopardy, Disqualified Employment Tax Levies, and federal contractor levies.
While receiving an IRS Intent to Levy Notice can be daunting, it’s crucial to remember that you have a 30-day window to respond appropriately and prevent the IRS from proceeding with enforcement actions.
The notice will list the tax type (i.e 1040), tax period, unpaid amount from prior notices, additional penalty, additional interest, and the amount owed. Along with the notice, the IRS will also include Publication 594: The IRS Collection Process and Publication 1660: Collection Appeal Rights.
You have the option to submit an appeal in response to the Final Notice of Intent to Levy through a Request for Collection Due Process or Equivalent Hearing. The tax modules included on the Final Notice of Intent to Levy can be included on the appeal request. Under certain conditions, prior tax modules that are not included on the notice may also be included within the appeal request. Such tax modules would fall under the Equivalent Hearing provisions.
Consider RJB LLC as your ally in resolving your tax issues, and remember, you can contact us at any stage of the process.