About 458 billion dollars in taxes go unpaid each year. So if the IRS says that you owe years of taxes, you are not alone. And if you can’t foresee any way that you’d be able to pay those taxes, you are still not alone.
However, if you do owe taxes, one of the worst things you can do is ignore those letters from the IRS. Doing so could result in a levy being put on your property and/or other assets. But can a tax levy be reversed? The answer is, that depends.
Keep in mind that if a tax levy is placed on your home or other assets, it won’t be a private matter. An IRS tax levy can not only affect your life and your job but your reputation as well.
Keep reading to find out what kind of relief you might be able to acquire should you be facing a tax levy.
What Is a IRS Tax Levy?
A tax levy is when the IRS issues a notice of levy to a third party who is responsible for that particular property. It’s their last resort for collecting money, and they can do it both in the United States and on accounts and properties overseas.
For example, if the IRS issued a levy against your wage’s, they would notify your employee. If they issued a levy against your bank account, they would notify your bank. And if they issued a levy against your brokerage account, they would notify the brokerage firm holding that account. Either way, when it comes to a tax levy, they are seizing your assets, bank accounts, and properties in order to collect a debt.
But before a levy can happen, the IRS must notify the taxpayer first. They must also first conduct a thorough investigation, including:
- Verification of the taxpayer’s liability
- Analysis of whether or not the levy is uneconomical
- Alternative collection methods must be considered
Before a tax levy can take place, and before the notice for a tax levy is sent out, there are numerous bills and letters that typically get sent out before. Thus, a taxpayer should have plenty of time to negotiate with the IRS before a levy is ever placed.
What Is Wage Garnishment?
IRS garnishment is a little bit different than a levy in that they don’t seize 100% of your bank account or whatever else it is that they are holding.
The IRS will contact your employer and garnish your wages up to 70% of each paycheck. By enforcing a wage garnishment, they can take wages out of your check before the remainder is released to you.
Can an IRS Tax Levy Be Reversed?
While you want to avoid a levy being placed on any and all of your assets, it still happens to many taxpayers. So if you’re already there, let’s take a look at what can be done to get out of your sticky situation.
If you want to reverse a wage levy, you’ll have to file form 433F. You’ll send that form, along with proof of income and expenses, including bank statements and pay stubs.
Once they’ve reviewed all the required documents, they’ll issue a reversal or removal, and they’ll do so by requiring one of the following 3 actions:
- They consider your debt non-collectible based on your submitted information
- The IRS will require a monthly installment or payment plan
- The IRS will consider an offer in compromise if you qualify
An offer in compromise is an offer to pay less than what you owe. It’s an amount that a taxpayer and the IRS will agree upon based on the taxpayer’s assets, income, expenses, and ability to pay.
If you want to reverse a wage garnish, you have the same options as you do for reversing a levy. You can pay your debt in full which would reverse your garnishment or levy immediately. If you aren’t able to pay your debt in full, you can make an offer in compromise and agree on an amount with the IRs.
If you are able to pay your debt, but not all at once, you can agree on a monthly payment to be extracted from your bank account on the same day, each month.
You can buy some time for yourself by being considered non-collectible. For this option, you must prove that you’re in a financial crisis with the debt owed and then the IRS will reverse your garnishment or levy until you are in a better position to pay what you owe.
Filing bankruptcy is another option. However, they will only remove the garnishment while your court proceedings are in process. As soon proceedings are over, the garnishment may begin again.
How Does It All Begin?
Before a tax levy or wage garnishment even begins to play a role in your life, there are many steps the IRS will take before they seize your property or wages.
You’ll receive notices like “failure to file” penalties and “failure to pay” penalties at the very beginning. Refunds could be confiscated as payment owed, serious notices will start coming in, and social security benefits could be affected. There are many things that will happen before a levy.
Keep in mind, however, that the IRS will send all documents to the last address that you used to file taxes. So if you’ve moved and don’t receive such notices, it’s still your responsibility to be aware of them.
Where Should You Go from Here?
Can an IRS tax levy be reversed? The answer is yes, but how it happens depends on each taxpayer’s individual situation.
The best thing you can do for yourself if the IRS seizes your assets, bank account, or wages is to pay your debt in full. If this isn’t feasible, you should hire a tax professional who knows all the ins and outs of reversing a tax levy.
Even if your debt is enormous, you may be able to make an offer in compromise for a much lower amount. You might be able to pay a small monthly amount, or you may qualify for loopholes that only a tax professional will be able to get you out of.
Don’t panic. We will advocate for you and help you find relief. You can call us today for a no-obligation, FREE consultation.