What Is the Meaning of a Tax Levy?
In the simplest terms a tax levy is the act of collecting a tax. People pay numerous different types of taxes throughout their life, such as sales tax and inheritance tax. The type of tax that concerns most people is income tax. This tax is a percentage taken from each worker's income so that the government has money for things like road construction and bridges. If a person gets behind on or does not pay this tax, they often find themselves in the unenviable position of an involuntary tax levy. The government has numerous tools at their disposal to collect any taxes owed them.
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Wage Garnishment
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The IRS (Internal Revenue Service) traces its roots back to 1862, when the United States government created a department capable of levying, assessing, and collecting taxes. When individuals do not pay or get behind on taxes, the government empowers the IRS to collect on this debt. Wage garnishment is a common tool used by the IRS to collect taxes owed. This process is one in which the IRS takes a certain amount from a worker's paycheck to pay toward their tax debt. In order to do this, the IRS serves a court order to an employer, ordering them to send the IRS a certain amount from the employee's paycheck.
IRS Liens
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Another way the IRS levies taxes is through placing a lien on a person's property. If a property has a lien against it, it means the IRS collects any taxes owed to them out of whatever money is paid to the taxpayer when that property is sold.
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Bank Levy
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The IRS may choose to freeze the bank accounts of those who owe them taxes. To do this the IRS sends a legal order, called a bank levy, to a person's bank or financial institution. Once this is done, the accounts cannot be accessed or used.
Asset Seizure
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One of the most common methods the IRS uses to get unpaid taxes is asset seizure. The IRS takes a person's house, car, or anything else of value and puts it up for public auction. The IRS then takes the money made at auction to pay that person's tax debt.
Tax Debt Settlement
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There is help for those who find themselves under the burden of a tax debt or levy. A common tool available to taxpayers is a tax debt settlement. A settlement is when the IRS agrees to accept a lesser amount from an individual as payment in full. This can be done through a cash option in which a person must pay the entire settlement within a five month period. It can also be done through a short term periodic payment of twenty-four months. It is usually a good idea to consult a tax attorney when trying to negotiate a settlement, since they have experience dealing with the IRS and their processes.
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References
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
