This past week, a bill was introduced in the House of Representatives that would provide individual or business tax relief by giving the IRS the power to release a tax levy when the imposition of the levy would cause economic hardship. The bill, identified as the Tax Levy Relief Act of 2012, was introduced by Representative Jim McDermott, a member of the House Ways and Means Committee. At a time when many businesses are having difficulty meeting their tax obligations, McDermott’s bill is designed to provide tax relief by giving the IRS the discretion to decide the best way to collect an outstanding tax debt without causing irreversible harm to the business.
A tax levy is the seizure of the property of an individual or a business by the IRS or one of the State Tax Agencies. A Notice of Intent to Levy is generally issued only when there has been no attempt by the delinquent tax entity to resolve an existing tax debt. It is one of the final steps in the enforced collection process and is usually exercised only after all previous attempts to collect a tax debt have failed. A tax levy is different from a tax lien in that the levy actually results in the confiscation of the property while the lien simply gives the issuing tax agency priority over other creditors with respect to the identified property.
The IRS must officially warn a business before its assets are seized to satisfy an existing tax debt. The agency begins the levy process by sending out an official written notice called the Notice of Tax Due and Demand for Payment. If the delinquent tax entity fails to respond to this notice in a timely manner, the IRS will issue a Final Notice of Intent to Levy together with an official notice informing the taxpayer of their right to a hearing. Once the official communication process has been completed, the IRS is free to seize the levied assets without further notification.
The Tax Levy Relief Act is designed to give the IRS the same power to release levies on businesses that it already has for individuals. If it is signed into law, the new legislation would allow IRS employees to consider such factors as longevity, previous compliance history and the reason for the delinquency instead of just evaluating the ability of the business to liquidate assets to pay the debt. While the proponents of McDermott’s bill feel that businesses should ultimately pay off their tax debt, they have pointed out the seizing of productive assets should not be the only option. At a time when the economy is trying to recover, they emphasize that levies can often cause irreparable economic hardship to struggling businesses which ultimately results in a loss of jobs.
The IRS is a very powerful collection agency and an IRS Levy is one of its most aggressive collection actions. Once a business or individual taxpayer receives an IRS Notice of Tax Due and Demand for Payment or an IRS Notice of Intent to Levy, they should realize that enforced collection action is imminent. The most effective response at this point may be to enlist the help of a qualified tax resolution specialist. An individual who has experience working with the IRS and who understands tax law may be able to stop any impending collection activity. There is also the chance that a tax professional will be able to reduce the tax liability that resulted in the collection action or eliminate it altogether.
If you are the target of a tax levy or any other type of aggressive collection activity by the IRS or State Tax Agency, our experienced tax professionals can help you forestall the action and resolve the tax debt issue that caused it. Visit us today at businesstaxpreparation.com for more information about our tax debt resolution services. Email us at email@example.com or call (866) 676-9417 or to receive a free, no obligation consultation.