IRS Tax Levies, Liens, and Your Life

Don’t be the victim.  Most people who are in debt to the IRS make the mistake of ignoring any letters the IRS sends.  You have to take action before you receive a third letter from the IRS.  Why the third letter?  That is the “intent to levy” letter, and that’s when the IRS owns you.  And how can the IRS own you? 
 
Have you been saving for anything lately?  Maybe you were putting money aside for a vacation, or even your retirement.  Remember that Uncle Sam wants you to pay him his money first.  The IRS can put a levy on your bank account, pension, 401K plans, just to name a few, to get the money you owe them.  What is a bank levy, you ask?     
 
Here’s what happens with a bank levy.  You go to the store and try to use your debit card.  It gets declined.  You try to use it again and it’s declined again.  You’re sure that you have money in the bank, so you call them.  The bank has the pleasure of informing you that the IRS has seized your accounts.  You can’t access your funds: not for groceries, not for rent, not for anything.  The good news is a bank levy is pretty easy to “lift”.  The bad news is that it gets lifted after the IRS has cleaned you out. 
 
Today is payday…Today is payday and after a long hard workweek, your employer passes out the paychecks.  But wait, what has happened to your “net paycheck amount”?  You hustle over to the accounting department, paycheck in hand, ready to find out who made the big mistake.  Unfortunately, you did.  The IRS has decided that they are tired of waiting on your delinquent tax payment.  And they are tired of having their letters ignored.  So here you are, with your paycheck in your hand, the victim of the IRS wage levy.  You investigate further and are made aware that this small remaining portion is what the IRS feels you are entitled to for your living expenses.  An IRS wage levy is one of the most financially devastating collection tactics.  Your employer was required by law to calculate the IRS’s share, no wiggle room allowed. An IRS wage levy can take as much as 50%- 75% of your paycheck.  And they have.
 
Home Sweet Home…The IRS can also put a lien on your home.  In short, you can’t refinance, take out a loan against the equity, or even get the city permits to make improvements.  When your home gets levied you are in double trouble.  Even if you have equity in your home, you couldn’t take out a loan to pay off the debt.  It really is a vicious circle. 
 
We’re not done yet…and for now for the last trick.  Not only can the IRS take the money from your bank, and put a lien on your home, but they can put a tax levy on your credit.  A tax levy is a serious black mark on your credit score.  A tax levy will cripple your ability to get a loan for anything, and can cause you to lose your job in some fields/professions.  The only way to get an IRS tax levy off of your credit is to pay off the tax debt.
 
What can you do?  Unlike some of the IRS’s other collection actions, there is not much you can do with liens and levies until you pay that debt; or the IRS gets it out of you.  Don’t make the common mistake of so many tax debtors.  Now that you know what will happen, don’t wait for that third letter.