What Does a Levy Mean?
Levy is a formal action that takes property to pay off a debt. The Internal Revenue Service (IRS) can take money from their tax returns or property to punish people who don’t pay their taxes. The government can also take money from other assets, like bank accounts, rental income, or retirement accounts.
Different Kinds of Levies
Tax authorities, like banks, the Internal Revenue Service (IRS), or a state budget, can use levies.
Tax Charge
The IRS can take someone’s property to pay off a tax bill in the United States. Real property, such as money in a bank account, a house, a car, or a boat, can be charged. For people who owe back taxes to the federal government, the Internal Revenue Code (IRC) allows charges. If someone owes federal taxes, the IRS has to figure out how much they owe and give them a notice and demand payment.
The IRS will send a “Final Notice—Notice of Intent to Levy and Your Right to a Hearing” if the person doesn’t pay the tax or refuses to do so. You can give this to the taxpayer in person, have it dropped off at their home or business, or mail it to their last known address at least 30 days before the charge.
You can levies on intangible property that doesn’t belong to the person behind on their payments. This can be money from salary, retirement plans, dividends, bank accounts, licenses, renting income, debts owed, fees, or the cash loan value of a life insurance policy.
You have to pay a fee when you don’t pay your state taxes. If someone owes the IRS, they can take their state tax refund. After the takeover, the debtor will get a “Notice of Levy on Your State Tax Refund and a Notice of Your Right to Hearing.”
Bank Tax
To put a bank levy on a debtor’s account, a creditor must get a court ruling against the bankruptcy. When bankrupts don’t pay back their debt in full, the bank fee freezes their accounts forever. The creditor can take the money from the bank account to pay the bill. Customers may have to pay a fee to their bank for handling a levy on their account.
A bank charge can happen if you don’t pay your taxes or personal debts. It is impossible to take money from some accounts, like Social Security Income, Supplemental Security Income, Veteran’s Benefits, and child support payments. When someone owes money to the federal government, like on student loans or back taxes, they can take money from their bank account without a court order. This is different from private debt, like credit card debt. Agencies like the IRS usually let taxpayers know when they are behind on payments and allow them to fix the problem before levying their accounts.
Levy Based on Climate
A green fee is a tax on garbage that makes the air dirty, like greenhouse gases. These taxes aim to encourage people to act in ways that are good for the environment by making it more expensive for businesses to spew pollution. Most of the time, green taxes are carbon taxes. People usually charge taxes on greenhouse gases as an emissions tax or a tax on things or services that use a lot of greenhouse gases, like oil.
Mill Tax
A mill levy, also called a mill tax, is a property tax based on how much the land is worth. Local governments use mill levies to give money to school districts or parks. Every year, a tax assessor figures out how much each property in the area is worth. Taxes are then based on a portion of that value.
Take-outs and Liens
Creditors like the IRS and private parties can use garnishment. Creditors can borrow money from a bank account with a levy, but a garnishment takes money from a person’s wages or income to pay off a bill. Private companies and the government can both use liens and garnishments.
They don’t need a court order to take assets or levies from people by federal bodies like the IRS. People who don’t pay their bills or child support often use garnishments to get their money back. Debtors may be able to get some help if the penalty will make their finances worse.
A levy differs from a lien because it takes the property to pay off the tax debt, while a lien is a claim used to secure the tax debt. A lien protects the government’s interest or claim on someone or a business’s property while the tax debt is still due. A levy lets the government take the property and sell it to pay off the tax debt.
The IRS can put a federal tax lien on a taxpayer’s property and assets to inform other creditors that the taxing authority has the legal right to take them. A tax lien lets the government officially take the taxpayer’s property to get the money they owe in taxes if they don’t pay them. It used to be that a tax lien would stay on your credit record for up to 15 years, but as of April 2018, tax liens are no longer shown on credit reports.
Keeping Levies Away
People who owe taxes should pay them and file their forms on time. People can either ask for more time to pay or call the IRS and make plans to pay the rest over time. Tax bills can be settled for less than what people owe, or people who owe money can make a payment plan. People who get a bill from the IRS that says “Final Notice—Notice of Intent to Levy and Your Right to a Hearing” should contact the IRS.
IRS Mistakes
By sending Form 8546, Claim for Reimbursement of Bank Charges, to the IRS address on the taxpayer’s copy of the levy, the taxpayer can get their bank fees back from the wrong levies. All of the following must be true to get bank charges back from the IRS:
- It was probably the IRS’s fault.
- The public couldn’t have done anything to keep the mistake going or make it worse.
- Before the levy, the taxpayer had to have responded quickly and given the details needed to determine their situation.
What part of the Constitution gave Congress the power to tax income?
The 16th Amendment lets Congress gather income taxes directly, regardless of how the states’ censuses turn out. Before the Amendment was passed in 1909, states could only share income taxes based on the number of people living there. As of the 16th Amendment, most of the federal government’s money came from income taxes and customs fees.
What can you do to stop a charge on your bank account?
Bank account levies are easy to avoid if you pay off the debt that caused them in the first place. People can get back into their accounts if they can show that the tax was caused by a mistake on the creditor’s part or that their name was stolen.
How often can the IRS take money out of my bank account?
The IRS can put liens on as many people as they want to get back unpaid taxes. But the IRS can only take 15% of Social Security payments; it can’t take any of the benefits that soldiers get. The IRS may also lift a charge if the lost funds would make things too hard for the person’s finances.
Why do we need to pay an ad valorem tax?
An ad valorem tax is based on how much something is worth, usually a car or a house. As “ad valorem” means “according to value,” these taxes are given to different people in the community based on how much their land is worth. This kind of tax gives money to local governments and school districts.
In Short
When a taxing body or a bank needs to seize property to collect an unpaid bill, they use levees. Money, cars, houses, and wages are all examples of property. A lien only shows the claim used as protection for the debt, while a charge shows the whole thing. Using a garnishment tells a company to give a debtor a portion of a worker’s pay.
Conclusion
- Levies are the legal way for a bank or tax body to take property to pay off a loan.
- A tax can take cash, cars, houses, and even future pay.
- A levy differs from a lien because it takes the property to pay off the tax debt, while a lien is a claim used to secure the tax debt.
- With a garnishment, a court tells an employee’s boss to give some of their pay to a debtor.
