A tax levy refers to the process of collection employed by the IRS (Internal Revenue Service) to legally confiscate the assets of a taxpayer to fulfill unpaid taxes. Following assets may be seized during the tax levy process:
- Investment accounts
- Social Security
- Account Receivables
- Bank Accounts
- Insurance Policies
- Physical Assets
Tax Levy types
The common types of tax levy entail bank levy, reduced tax refunds, 1099 levy, wage garnishment, property seizure, passports seizure, and seizure of other assets. The IRS may use the most efficient method to recuperate the due money, depending upon the situation of the taxpayer. Let’s understand the types of tax levy in detail.
- Bank levy: The IRS contacts the bank of the taxpayer and asks them to withhold a specific amount of funds, deduct them, and forward them to the IRS. In case the money isn’t enough to settle the debt, the process shall be repeated by the IRS until the dues are all satisfied.
- Wage Garnishment: The IRS gets in touch with the employer of the taxpayer and needs them to hold back a specific percentage for paying due taxes. This shall continue until the money is accrued to fulfill the debt along with the penalties and interests.
- Property Seizure: The IRS has the liberty to seize any property of the taxpayer, auction it and keep the takings.
- 1099 Levy: The IRS will allocate levies to gather existing 1099 payments of a taxpayer.
- Reduced Tax Refunds: The IRS has the liberty to keep the amount that would else be refunded to the taxpayers after-tax filing is done. This holds true solely for federal tax refunds and for state tax refunds too.
- Seizure of passports: The IRS can solicit the State Depart to deny or revoke the passport of the taxpayer if over $50,000 in past taxes are due.
- Other assets seizure: The IRS may levy taxpayer assets like life insurance policies, licenses, account receivables, stock dividends, retirement accounts, and other income.