Steps the IRS Can Take to Force Payment
If you do not set up a payment plan, negotiate an offer-of-compromise, or secure “currently not collectible status,” the IRS can force payment. Before the IRS actually forces payment, it will generally send you a series of threatening letters, for instance a Notice of Tax Due and Demand for Payment or Final Notice of Intent to Levy.
These notices inform you that the IRS intends to seize or “levy” your property. The IRS can take any or all of your property, such as bank accounts, paychecks, and even homes, with the exception of certain exempt types of income and possessions.
Part of your wages are protected from being seized by the IRS—they are exempt from levy. A single filer can protect $241.35 per week, while a married couple filing jointly can protect $482.69 a week, meaning all of your salary will be seized except for the protected amount. Also exempt from levy are unemployment benefits, workers’ compensation benefits, certain public assistance benefits, income needed to pay court-ordered child support, and certain pension benefits. Other protected property includes certain amounts of clothing, furniture, personal effects, and job-related tools. A state homestead exemption will not protect your home from an IRS tax lien or seizure. The IRS will not know about exemptions or defenses unless you or your advocate informs the IRS.
The IRS can also recover past-due taxes by seizing certain federal benefits and other payments, including Social Security payments (but not Supplemental Security Income payments). The IRS can levy 15% of your entire Social Security benefit. Unlike other forms of federal government seizures of benefit payments, the first $750 of your monthly income is not protected. In some cases, the IRS will levy even more than 15% of Social Security benefits.
Generally, the IRS will exempt low-income taxpayers from a levy on Social Security benefits. If your Social Security benefits are being seized, you should call the IRS at 800-829-7650 and specifically ask for them to remove the levy and place you in “currently not collectible” status or ask for a payment plan in a lower amount than the levy. Generally, the IRS will remove a Social Security levy if you are low-income. Resources for getting help are listed in at the end of this article.
When you receive a notice that your property is being levied or a lien is being placed on it, you can request a review of your case called a “Collection Due Process” hearing on Form 12153. You have thirty days from the date of the notice to request a hearing. The hearing request will result in a suspension of collection activities, including any levy, during the appeals process. During the hearing, you can request one of the payment options discussed earlier in this article—an installment agreement, an offer-in-compromise, or non-collectible status. In certain situations, you can dispute that you owe the tax.
Unless most or all of your assets and income are exempt from levy, it makes sense to negotiate for one of the three options for paying your tax debt to avoid seizure of personal property and income. Make sure any agreement is in writing. A good source for information about taxes is the IRS website at www.irs.gov.