A levy is a way for the IRS to actually take possession of your property without going to court. After the IRS takes possession they will sell the property to pay off your outstanding tax liability. A tax levy can cover any type of property that can be repossessed and sold for cash. This includes your house, your car, jewelry and property of this nature.
IRS Levy Can Effect Third Parties
A levy can also be used to require a third party that owes you money, to pay that money directly to the IRS. This includes any type of debt and a salary that you would normally receive from your employer.
Informing The Taxpayer
The IRS is required to inform you beforehand that you are about to receive a levy against your property. The first way they do this is by demanding payment from you for the outstanding debt you owe. If the taxpayer does not pay or refuses to pay within 10 days, the IRS will move forward in the levy process.
Next the IRS will inform the taxpayer in writing of their right to request a hearing within 30 days or the IRS will place a Levy on their property. If the taxpayer refuses a hearing then the IRS will go forward and levy their property.
The Power Of An IRS Levy
The IRS has the power to take your property through a levy without having to go to court. This must be kept in mind if you think that the court will help you against the IRS if you are negligent and refuse to work with the IRS. If they deem your property has value and can be used to pay off your tax debt, they will sell it and keep the proceeds.
They can also force third parties to pay without going to court. This levy is against a third party that owes money to the taxpayer but refuses to pay. The IRS will issue a levy to the third party and the money that was supposed to be paid to the taxpayer will be kept by the IRS against the taxpayer’s tax liability.
Notifying the Taxpayer Of Intent To Levy
The IRS is required to notify the taxpayer of its intent to level at least 30 days prior to doing so. If the IRS does not provide you with this notice or you believe you never received this notice, you must force the IRS to prove that they had sent it. If they cannot prove that they sent you this letter, it is possible to postpone the collection process.
Since you have the right to a hearing within 30 days after the notice is sent to you, if you did not receive the notice they must give you 30 days to request a hearing.
To request a hearing you must use Form 12153 (Request for Collection Due Process Hearing) which is presented here:
Notifying Taxpayer Of Seizure
Once the IRS takes possession of your property, they are required to issue a notice of seizure either in person or left at your residence. A notice will not be communicated to you through the telephone. If the IRS is unable to locate you, they will mail the notice to the last known address on file. The Courts have even ruled that if the notice is served to your bank, you are considered to have been served the notice.
All of these procedures must have been carried out correctly, if they haven’t, then it is possible to slow down the collection process and allow the taxpayer more time to negotiate and in some cases stop a levy all together.
When The IRS Will Not Levy Your Property
If it is determined that the cost of taking possession and the cost of selling the property is more than the fair market value, the IRS will not seize the property. This is because it does not benefit the IRS in any way and would ultimately make no sense.