When the IRS or state has failed repeatedly to collect back taxes, they begin to seize assets. This process is called a “levy.” When they attach wages, it’s termed a “wage garnishment.” After providing notice, these authorities are legally allowed to seize bank accounts, demand direct payment from accounts receivable (people who owe you money), take property for auction, and assume title on vehicles.
The majority of tax levies are automatically computer generated. Most of these tax levies are issued to financial institutions and employers. Nearly 3% of all taxes owed to the IRS are collected by some form of tax levy.
Virtually anything of value can be seized to satisfy the outstanding debt. Unlike bankruptcy proceedings, you have almost no “exempt” property.
Levies and wage garnishments are the most severe and crippling of all collection tactics. The IRS uses the threat of a levy or wage garnishment to force you to make “voluntary payments." The good news is that our staff has 35 years of experience lifting levies and wage garnishments quickly when you are threatened. This is a difficult and specialized task. When successful, depending on the type and severity, it usually takes only 2-10 business days for us to lift either.
If the government collects the tax through a levy or if you do not make a special designation when submitting payment, the payment is credited in the manner most favorable to the government; interest first, followed by penalties, then to tax liability.
On a federal level, this works a severe hardship on the taxpayer with tax debt and limited resources. There are procedures that we employ to have payments applied first to the tax. The key to this result is to have representation so that IRS is not obtaining its payments through levy or garnishment. It is also very important to have the payments allocated to the trust fund portion of any business taxes owing before any personal income taxes are paid.
Both the states and the federal government are subject to statutes of limitation on the time in which they have to collect debts. The IRS has ten years from the date the tax was assessed to collect.
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