Most taxpayers are informed that the IRS and State tax agencies have the power to take specific actions to collect on unpaid tax debt. Wage and bank levies are two actions that are commonly used by both IRS and State tax agencies. The difference between the two is that wage levies are attached to income that you receive from an employer and bank levies typically result in your checking or savings account being frozen by tax collection agency. If the IRS preparing to levy a taxpayer’s bank account or wages, they are required to provide notice before the seizure. This notice is typically accompanied by your rights as a taxpayer and instructions to request a hearing for due process.
Be Proactive Rather Than Reactive
By far and away the best approach to wage and bank levies to be proactive and start a tax resolution plan before the IRS or State tax collectors issue the levy to your bank, employer, or account receivable. For those who have waited too and dealing with a full-on levy, fortunately we can still help. But first let’s clarify some of the terminology to ensure a proper understanding. You may have heard someone use the term garnishment. A garnishment is essentially that same thing as a wage levy. Taxpayers and professionals use these terms, but they mean the same thing. Some people get tax lien and tax levy confused. To put it simply, a tax lien is public record filing to let the public know that the tax agency has claimed rights to property for particular debt amount. A seizure of property such as wages and bank accounts can devastate the financial wellbeing of an individual or business so it’s highly advised to quickly open any certified mail that you may receive from the IRS or State. Especially if it’s certified. Levies and intent to levies almost always come certified. This is by no means a perfect science, so don’t think that because your letter was not sent certified that you don’t have anything to worry about. Unfortunately, Federal and State collection division often levy accounts with now formal prior notice. Even though an individual or business is supposed to receive the form intent to levy notice.
Compliance Matters
If you have delinquent or missing tax returns, you will find it difficult or not possible to release a levy. Tax negotiations are like most negotiations. Meaning both sides are looking to gain something out of the deal. If a taxpayer is requesting a release of funds that the Government has already seized, they’ll want something in return, and the 1st item their list is always missing tax returns. If you are missing tax returns and don’t plan on turning them over, then tax collector has no incentive to grant you the release. This makes perfect sense because what the taxpayer owes a substantial amount more for the year or years that are unfiled. The collectors are smart, they may lead a taxpayer on to gain insight to what other income and assets are available, while fully intending on rejecting the levy release request because the taxpayer was non-compliant.
In terms of State levies vs. IRS levies, there many differences. Most State tax collection divisions such as California’s Franchise Tax Board issue wage levies to collect 25% of the employee’s wages. This levy will remain in affect until the debt is satisfied. If a taxpayer can prove financial hardship, the wage levy can then be modified to a lower amount. There are differences between State and Federal in relation to bank levies as well. One major difference is that when the California Franchise Tax Board levies a bank account, the money is frozen for 14 days before they submit the money to the Government. These are just a few of the variables that need to be considered when executing a wage and bank levy removal.
Contact a Tax Professional
There are various methods of releasing levies. Knowing which method to us and at what time is critical when requesting a levy to be lifted. It is very important to consider that lifting a levy is typically just the start of a long tax resolution process. If you give up too much information in the levy release process, you may find that you’ve missed or ruined your chances of obtaining a reduction in the overall balance.
If you have tax-related questions in California, the Enterprise Consultants Group’s tax advisors are available to assist you. Please contact us online or at (844) 485-1408 today to discuss your case.
