Believe it or not, the IRS really does not want to levy your wages and take your paycheck.
An IRS levy is usually issued when all else fails.
There are three things the IRS wants if you owe them back taxes and not providing those three items usually results in the IRS levying. Here is what the IRS wants:
1. Communication. Yes, the IRS wants to hear from you. If they have written you a letter, they want a response. If an IRS Revenue Officer has called you or stopped by your house, he wants to hear back from you. In other words, IRS collection employees have a job to do: figure out how the IRS can collect taxes. You are in the center of their job. Ignoring IRS efforts makes their job harder. That makes the IRS unhappy. We want to satisfy the IRS so they leave you alone. A happy IRS is good for you.
I always tell my clients that when your head is in the mouth of the bear, say nice bear. The harder you make it for the IRS, the harder they will likely make it for you. That means cooperation, not avoidance. (I understand that it is human nature to want to avoid the IRS, and that’s okay, but to solve an IRS problem, the IRS needs communication.)
The good news is that I have spent the last 20 years talking to the IRS – you don’t have to speak with them, leave it to me.
2. Compliance. If you owe back taxes, the IRS wants to make sure that you stop the problem. That means paying your taxes going forward. If you are self-employed, it is likely you owe the IRS because you did not make estimated tax payments on your income – you got paid, but the IRS did not. A simple solution is to open up a separate bank account – put your name on it, and ask the bank to title the account as an Estimated Tax Account. Every time you get paid from a customer, take 15-20% of the gross check, and immediately put it in the estimated tax account. Every quarter, the money you have set aside is paid to the IRS. And then, you should be in compliance with your IRS future tax obligations.
If you have unfiled tax returns, the IRS wants those returns to be filed. In most cases, the IRS considers filing of the last six years’ returns as being in compliance. If you don’t have all of your W2s, or 1099s, we can readily obtain them from the IRS.
If you are not current in paying your taxes, or in filing your returns, the IRS will desire to take matters into their own hands, and levy your wages and bank accounts. It doesn’t have to be that way, and in fact, the IRS prefers communication and compliance to levying.
3. Financial information on how you can – or cannot – repay the taxes. You owe the IRS money, and they want to know how they can collect it. And that does not mean that they can collect it – the IRS has numerous programs available to you if you are unable to pay. The IRS has a debt settlement program, known as an offer in compromise. The IRS also has a program to prevent you from being put in a state of economic hardship from a wage or bank levy, known as currently uncollectible. (When you are currently uncollectible, the IRS agrees to not take any action to collect your debt.) Or you may qualify for a payment agreement.
But the IRS will not know what option you qualify for if communication is poor and if we do not tell them.
Without financial information on how you can – or cannot – repay the taxes, the IRS will take matters into its own hands and levy your bank accounts and wages to get paid.
Communication, compliance and financial information gets levies on wages and bank accounts released.
That’s all the IRS wants – is to hear from you, and to see that you will pay and file your taxes going forward, and will work arrangements to pay – or even not pay – what is owed. Providing that information not only stops them from levying, but gets levies released.