Back taxes are some of the most difficult debts to settle. If you owe the government back taxes, you may be in danger of receiving a state tax levy notice on your property, bank account, or other assets.
Once the government places a state tax levy on your assets, you may not be able to access them or receive the proceeds from their sale. Here’s an in-depth guide on state tax levies, with tips on how you can convince the government to release them.
What is a State Tax Levy?
A state tax levy is the state’s way of legally seizing a taxpayer’s assets to satisfy back taxes owed. It can come in the form of a property seizure, wage garnishment, or bank account seizure.
The state will notify the taxpayer of their tax debt through a series of notices. If the taxpayer fails to settle the taxes due or arrange a payment plan with the state, the government will proceed to enforce a state tax levy on the taxpayer’s assets.
Not all assets and properties can be seized by the state. Exempted assets will vary from state to state.
5 Forms of State Tax Levies
Here are some common forms of state tax levies the government places on taxpayers’ assets.
1. Bank levies
A levy against your bank account means the state will order the bank to freeze your account. You can still deposit funds into your account, but you won’t be allowed to withdraw them while the levy is in effect.
Failure to pay your tax liability within the said timeframe will prompt the bank to forward the money you owe to the government.
2. Wage garnishment
If you earn income as an employee, the state can require your employer to deduct a portion of your wages, salary, bonuses, or commissions each pay period to cover your tax debt. The amount to be deducted from your wages will depend on your number of dependents.
3. Property seizure
In this type of levy, the state sends you a notice of your property’s sale and announces its pending sale to the public. If you don’t contest your property’s fair market value determination within a set number of days after receiving the notice, the state will proceed to sell your property. The money from the sale will be used to cover your tax debt.
4. Reduced tax refunds
The state can also reduce your federal or state tax refunds to offset your tax debt. In such a case, your state’s taxation authority will issue a notice containing the amounts of your tax refund and offset. You should contact the concerned agency if you think there are disparities with your supposed tax refund and offset amounts.
5. Seizure of other assets
Apart from the above-mentioned assets, the state may also be able to seize your retirement accounts, stock dividends, licenses, life insurance policies, or account receivables to cover your tax debt.
Four Tax Resolution Strategies to Release a State Tax Levy
Here are ways you can convince the state to lift a state tax levy.
1. Settle your tax debt
In most cases, paying your tax debt is the only way to release a state tax levy. Here, it is vital to cooperate with the state’s taxation authority and provide the essential documentary requirements. You could avail of tax negotiation services to help you settle your tax liability with less pressure and stress.
2. Claim and prove economic hardship
The state can lift the state tax levy if it prevents you from generating basic, reasonable living expenses. However, a levy release does not exempt you from paying your tax debt. The state will work with you to help you pay off your tax liability.
3. Enter into a payment plan
You can sign up for a payment plan if you can’t settle your entire tax liability in one go. The payment amount will depend on your economic situation and financial ability.
4. Negotiate an offer-in-compromise (OIC)
An OIC helps you settle your tax liability for less than what you owe. Many states offer OIC as a possible resolution option.
Settle Your Tax Liability with the Experts
Settling back taxes is already hard enough. What more when you have to deal with a state tax levy? You should pay your taxes and file your tax returns on time. The earlier you fulfill your tax obligations, the more you can save yourself from penalties and other inconveniences.
If you have a tax problem and need a negotiation expert to help you settle the issue, reach out to us at Peace of Mind Tax Help. We offer tax negotiation services that aim to minimize your tax liability.
Contact us today to learn how we can help release the state tax levy on your assets.