Most Tax Collector’s (the banks you owe money) have very little right to force collection from you without first winning a lawsuit against you for not paying back your debt. For example, if you stop paying your credit card bill, the bank who backs that card would have to win a lawsuit against you and get a judgment from the court before they could levy your bank account or garnish your wages. However, the IRS has collection powers without needing a judgment from the court.
A Tax Collector’s Right to Levy Your Bank Account
The IRS has the right to levy your bank account without filing a suit for unpaid taxes. This means the IRS has the authority to seize money directly from your bank account.
Moreover, the IRS isn’t limited to levying only bank accounts. An IRS levy permits the legal seizure of your property to satisfy a tax debt. The IRS also has the power to garnish your wages and to seize and sell your real estate, vehicles, and other personal property.
Your Right to Due Process
You still have the right to due process, which you means you will be notified before money or property is seized. The tax code requires that the IRS give you notice of your tax debt and notice of their intent to levy. This IRS letter will be entitled Final Notice of Intent to Levy and Notice of Your Right to A Hearing.
Avoiding an IRS Levy
If you cannot pay the taxes that you owe in full, you can attempt to work out a payment plan with the IRS to pay off the remaining balance. To avoid a levy it is imperative that you be proactive. Do not ignore IRS bills or notices. Remember the IRS has serious levy power that you do not want to be enforced against you.
Handling Tax Debt Through Bankruptcy
Certain older personal income tax debts can be erased through bankruptcy. Newer tax liabilities are nondischargeable and are not erased in bankruptcy. Also, payroll taxes and penalties for fraud cannot be erased.
The following three criterion must be met in order for an income tax debt to be dischargeable in bankruptcy:
- The tax debt must be at least 3-years old: The tax return associated with the tax debt must have been due, including any extensions, more than 3-years before the date the bankruptcy case is filed.
- The tax return related to the debt must have been on file for at least 2-years: If the tax return related to the debt was not filed on time, that tax return must have been filed more than 2-years before the date the bankruptcy case is filed.
- The tax debt must be assessed by the IRS at least 240 days prior to filing bankruptcy: A tax debt is assessed on the date the tax liability is officially assessed at the IRS Service Center and the applicable form is signed by an IRS official.
These rules apply to both federal and state income tax debts.
Even if your tax debt cannot be erased through bankruptcy, filing may help you get a handle on your debt problem. For example, filing a Chapter 13 Bankruptcy creates an opportunity for you to pay back your tax debts over time without the risk of the IRS levying your bank accounts or seizing other property.
The Law Office of Barbara B. Braziel
Learn about the ways bankruptcy can help you. Contact us for a free consultation by clicking here or calling (833) 522-1069. We’re here to help you gain the financial freedom you deserve. The Law Offices of Barbara B. Braziel proudly serves the greater Savannah, GA area. Find out more about Bankruptcy in our guide: All About Bankruptcy.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.
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