IRS Levies Can Wipe Out Your Accounts

IRS levies are one of the most devastating financial hits you can take because they can drain all of your accounts and bar access to any of your securities without your consent. While the IRS has the obligation to notify you of any taxes you are due and give you the opportunity to pay, once they serve you with a second notice, called a Notice of Levy, you only have a few weeks to respond.

If you do not respond with a proposal to pay your taxes in full or through either a payment plan or Offer in Compromise (a partial payment instead of full payment that will clear your debt), IRS levies quickly go into effect. Often, an individual doesn't know that IRS levies have actually taken place until they try to access their accounts or checks begin to bounce.

Not all IRS Levies Are Limited

IRS levies take a variety of forms, including wage garnishment, seizure of bank accounts and securities and diverting of funds owed to you. While some IRS levies are limited in scope, others aren't. For instance:

Wage garnishment IRS levies are limited to a specific percentage of your disposable income (the income you receive after mandatory deductions such as state and local taxes are removed). In most cases, they can take up to 25% of your take-home pay.

IRS levies against your bank accounts are activated as a one-time action, so once they levy your accounts they can't do it again. However, when they do levy your accounts, they can take every dollar you have in savings and checking accounts at as many banks as you have accounts. These IRS levies are particularly damaging because you not only lose your money, but you will often incur additional costs in the way of bank fees for bounced checks and insufficient funds.

Securities and investment funds are subject to IRS levies as well. If you own securities worth a significant amount of cash, you could lose them in one fell swoop.

If you are self-employed, IRS levies can be placed on any outstanding funds that are owed to you so that before a bill is paid to you, the client or customer is compelled by law to pay the money to the IRS instead.

All of this sounds pretty dire, and it can be. IRS levies can reduce you to living paycheck to paycheck after years of saving and building up some reserves for emergencies or investments.

Experts Can Help Stop IRS Levies

Consulting with a qualified tax law expert can help you stop a levy before it is put into motion if you take quick action. First, you should contact a professional as soon as you receive a Notice of Intention to Levy. Second, you should immediately work with this person to put together an offer to begin paying back your debt. This is usually enough to stop IRS levies from moving forward. In some cases, you can even put a hold on IRS levies by proving that it would be a financial hardship to have your accounts seized. If you work with a tax law specialist, you can prevent any unpleasant seizures before the happen - but only if you act quickly. Otherwise, you may wake up tomorrow and find out your bank balance is $0.00!