What Is A Federal Tax Levy?
A federal tax levy refers to a type of involuntary deduction or wage garnishment by the federal government. The federal government uses this type of deduction to collect unpaid federal taxes by seizing the tax payer's property. A federal tax levy is not the same as a federal tax lien. When the IRS uses a tax lien it claims the tax payer's property as security until the dues are met. However with tax levies, it claims the property straight away to satisfy the dues. Federal tax levies can be claimed from any kind of property owned by the tax payer. The IRS may choose to sell off real estate, cars, boats, etc. Alternatively it may realise the back taxes from earnings, bank accounts, retirement accounts,etc. A tax levy is applied only after the IRS has sent notices informing the tax payer about the dues and the dues remain unsettled. On receiving a notice the tax payer can choose to appeal against it on several grounds. These include reasons such as the tax has already been paid, the notice has been sent when the person is going through bankruptcy, there is some mistake in the notice,etc. When the IRS imposes the levy on wages or federal payments, the levy is terminated when the debt is paid or if the time for collecting the tax expires or if the levy is released. What sets federal tax levies apart from other involuntary deductions is the fact that the IRS allows a certain amount of exemption when it is collecting its dues from a person's wages. After exemption, the net pay is collected as tax by the IRS. Employees have to submit a written request or fill in a form in order to find out the exemption amount that is applicable to them and their current status. In case the IRS does not receive such a request, the employer the form applicable to Married/Separated with One from for everyone until they receive a new exemption amount and status from the IRS. The deductions are made continuously by the Payroll department until the full amount of unpaid dues is made up. Alternatively, the deductions can stop if the IRS releases the employee from the payments. Once the Payroll receives the tax levy, no further changes can be made to the withholding amount held by the employee. A change is possible only if the IRS wants the employer to stop voluntary deductions to a Credit Union. In the case of bank accounts the bank is required to send the amount of the dues along with interest to the IRS after the holding period expires. During the holding period, which is usually about 21 days, any issues like ownership of the account can be resolved. |
