Levied in San Jose, CA: How To Resolve the Issue

The focus of my practice is in assisting taxpayers like you with complex tax and financial issues, including the IRS tax levy, collections, and civil taxpayer representation. Individuals living the daily life with their assets levied by the IRS brings about great stress and the unnecessary burden of carrying the weight of having a tax levy hanging over them, and not seeing how to get out from under it.

In most circumstances the taxpayer had ample notices and warnings from the IRS regarding a tax assessment that had not yet been paid, and that a levy could be issued. But, for whatever reason, the taxpayer made the decision to ignore the notices, and now the easily remedied problem has grown into a major issue. The seizure of assets is at stake, and the IRS now has the taxpayer's full attention to the matter at hand. Ignoring the problem will not make it go away, and the IRS intends to collect what they feel is rightly theirs.

A levy empowers the government to take and seize your property. There are exempt property, but what is available to be taken leaves taxpayers with a less than comfortable life style. Here is a list of types of property that is exempt from a tax levy.

• School books and apparel (excluding expensive, luxury apparel).
• Fuel, provisions, furniture, and personal effects with a value of up to $9,120 (for 2016) for taxpayer's household.
• Books and tools of trade, business, or profession with a value up to $4,560 (for 2016).
• Unemployment benefits.
• Undelivered mail.
• Certain railroad and military service annuity and pension payments.
• Workers' compensation payments.
• An amount of the taxpayer's income sufficient to comply with a judgment to contribute to the support of the taxpayer's minor child (i.e., child support payments).
• A limited amount received as wages or salary for personal services rendered, or as income derived from other sources.
• Certain payments made for a service-connected military disability.
• Certain public assistance payments as well as payments under the Job Training Partnership Act.
• Principal residence or business assets under certain circumstances (see paragraph 1108.10).

A portion of your wages are exempt, equivalent to: the taxpayer’s standard deduction plus the personal exemptions divided by the pay periods...that doesn’t leave much for the taxpayer after wages have been garnished.

There will be a levy on your bank account, and there will be a levy on retirement accounts where you have the ability to access the account to withdraw the money. The levy used for bank and retirement accounts is a “regular levy” and this levy is effective at the moment the levy is received. The bank will hold this money for 21 days before releasing to the IRS, and any interest that accrues during that time frame will also go to the IRS.

There is also the “continuing levy” which is used to garnish wages and regularly paid commissions, and these are held in place until the government releases them. It is easy to understand the impact of having wages and commissions garnished on a continual basis, there is no breathing room.

The first step to getting things back in control, is to contact the IRS, which we will do as your representative, and begin a dialog. Let them know that there is a plan at hand to resolve the tax issue. The taxpayer needs to get into compliance, get any missing returns filed, collect all the information and documentation, and provide the IRS with any requested information. We need to work quickly and cover all bases, and be prepared to explain the situation with well documented and organized backup.

If the IRS does not want to work with you on the levy, especially the garnishment of wages which could be causing a financial hardship, the National Tax Advocate can help get the levy released. Then it’s time to get ready to go to appeals, which I’ll share in my next post.

If you have any questions on the IRS tax levy issue in San Jose, CA or elsewhere, feel free to contact me at (408) 627-8079 or by email at dan.ohara@oharataxes.com.