An IRS Levy is a legal seizure of a taxpayer's property to satisfy a back tax debt that is owed to the federal government. A struggling taxpayer who has outstanding IRS tax debts are subject to the IRS executing a levy (garnishment) on income and assets.
If you, the struggling taxpayer, are subject to the levy, the IRS will send a notice to you. The notice will be a Notice of Intent to Levy and does not have to be received by the taxpayer. The IRS is only obligated to send the Notice of Intent to Levy to the last known address in its system.
A taxpayer has 30 days from the date of the notice to either pay the back tax debt or contact the IRS. If you fail to do either of these two (2) options, the IRS is allowed to levy (garnish) on your income, your assets and/or your Social Security.
Once an IRS Levy is in place, the IRS may withhold monies from the federal payments a taxpayer may receive. An IRS levy is considered to be continuous and the IRS will keep taking your money until the taxpayer's entire back tax debt is paid in full, a payment arrangement or Installment Agreement is made or the debt becomes unenforceable by law.
All taxpayers who owe the IRS for an outstanding tax liability will be subject to a levy on their assets which includes their sources of income. A taxpayer's Social Security benefit is subject to a levy by the IRS. There are 2 ways the IRS will place a levy upon your Social Security check:
- The Automated Federal Payment Levy Program (FPLP) - The IRS will match up your Social Security number that is on file in their Automated Collection System (ACS) with the federal government's computer that sends out checks which is called the Financial Management System. The IRS will take a minimum of 15 percent of a taxpayer's Social Security check each and every month or until the levy has been stopped and released.
- Manual Levy(non-FPLP) - Using the Manual Levy, the IRS has no restrictions as to the amount that they can take from a taxpayers wages or Social Security. All it takes is the signature of the Revenue Officer to get the Manual Levy in place. The IRS is supposed to take into account money the taxpayer will need for what is called "reasonable living expenses." Let's just say the IRS' idea of reasonable living expenses and realty are usually very far apart. The IRS will leave you with very little if any money at all.
- You can send the IRS the balance in full. Now, if you are a taxpayer experiencing financial difficulty, this probably isn't an option for you.
- A taxpayer could call the IRS and enter into a terrible payment plan. Our IRS tax relief team does not recommend this because a taxpayer will end up agreeing to go along with whatever the IRS Agent says they must do. This is the least desirable option a taxpayer can make.
- A taxpayer who is having a hard time making ends meet may be declared to be "Currently not Collectible" (CNC). When a taxpayer is declared to be Currently not Collectible, it is because there is a financial hardship and the struggling taxpayer will not pay anything. Yes, penalties and interest will continue to be added to the tax debt. Yes, there will be a Tax Lien filed. But, in all honesty, who cares? The Statute of Limitations will continue to run out and your Social Security benefit will be left alone.
- A taxpayer can settle with the IRS for less than the full amount. The IRS has expanded its Offer in Compromise program. The new and expanded rules for an IRS settlement is called the Fresh Start program. If the Offer in Compromise is done correctly, a taxpayer can settle for much less than he or she owes. Also, the agreed upon settlement can be paid over time so a taxpayer does not have to come up with a lump sum payment. If you are on Social Security and have limited or no assets, you would be silly not to take advantage of the IRS Fresh Start Offer in Compromise program.
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