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What is an IRS or New York State Tax Levy? And What Should You Do?

Dealing with the IRS

Facing the IRS for an outstanding tax liability is undoubtedly a frightening experience, but the key to getting through it is staying calm and making sure that you know your rights and take action. Understanding how the collection process works and knowing what you are up against are important, but in many cases, especially if you cannot reach an agreement with the agency yourself, a professional can better help you navigate the system and protect your assets and personal freedom.

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Liens vs. Levies

You may have heard of the IRS placing liens on property, especially on the homes of taxpayers who owe federal taxes. A lien is basically a legal claim against the property stating the government wishes to recover the back taxes that are due. Liens show up on your credit report and generally make it impossible to sell or refinance your home, although it is sometimes possible to do so, if permission is granted. A levy is different from a lien. Whereas a lien is a claim against someone’s assets, a levy is a legal seizure of assets. For example, the IRS can levy your bank account, or a state tax levy can be placed on your home. In addition, unlike a lien, a levy normally will not be reflected on your credit report.

How does a Levy Work?

A levy can be used by the IRS or by state tax agencies, such as the New York Department of Taxation and Finance. In general, before the government can seize your assets, they must send you a notice and allow you to request a hearing with an impartial officer. If the officer rejects your appeal, you then have the option of appealing to the US Tax Court. In unusual cases, appeals to higher courts have been possible.

How do you Stop a Levy?

The most important thing you can do if you receive a levy notice is reach out to the IRS and not procrastinate. A tax professional, such as an enrolled agent, accountant, or attorney, can help you assert your legal rights. However, be sure to thoroughly vet any tax professional you hire and ensure that they are experienced in successfully handling cases such as yours. You may be able to stop a levy if you can show it will result in grave economic hardship. Moreover, if your spouse is the one who is responsible for the tax bill, you may be able to get relief as an “innocent spouse.”

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What if the Levy Has Already Gone Through?

Even if the levy has already taken place, you may still be able to appeal after the fact and recover your property or money. Even if you cannot afford representation by a professional, the key is to be proactive. If you owe back taxes to your state, make sure you contact your state tax agency as well as any ombudsman or state-level tax advocate that may be available.

If you’d like to know more about how we can help you resolve your tax problem, call us for a FREE Tax Help Consultation at (855)829-8477.

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