The IRS can be fairly aggressive when it comes to adverse collection action. The IRS uses certain tactics to usher taxpayer compliance and to reduce the size of balances that are owed on taxpayer accounts. Tax levies are one of these collection tactics. The general rule with tax levies is that the IRS can levy all property that belongs to the taxpayer in order to satisfy the outstanding obligation. However, certain property is exempt from an IRS levy and cannot be seized by the IRS.
This list of property is codified under Internal Revenue Code (IRC) § 6334. Here is a comprehensive list of the items that are exempt from tax levies:
1. Clothes and educational books that are of necessity to the taxpayer and/or the taxpayer’s family
2. Personal items, personal care items, fuel, furniture, and personal effects. Note that these items cannot exceed $6,250 in value
3. Business and professional items, tools, or supplies including books and other tools of the trade that are necessary for the taxpayer’s production of income. Note that these items cannot exceed $3150 in value.
4. Unemployment benefits, including those portions that allocated toward the taxpayer’s dependents
5. Mail that remains undelivered
6. Certain types of annuity and pension payments.
7. Workmen’s compensation
8. Any portion of the taxpayer’s income or salary that is necessary for the taxpayer to comply with a court order or judgment granting support for children under the age of 18.
9. Minimum exemption for wages, salary, and other income that is further governed by § 6334
10. Certain disability payments, which are considered service connected.
11. Certain public assistance payments including public assistance and public welfare payments from a government agency.
12. Assistance that comes under the Job Training and Partnership Act.
13. Residences are exempt from levy in small deficiency cases. Primary residences and certain business assets are also exempt, except barring special approval or in certain instances of jeopardy that is documented by the IRS.
It is important to note that the dollar amount limits placed on the totals of certain items are subject to fluctuate from year to year. Furthermore, it is my professional opinion that a taxpayer should contact a tax professional immediately for assistance if any of the above items are levied or tax levies by the IRS threaten the economic stability of the taxpayer. While is a possible to get tax levies released prior to them becoming final (the taxpayer usually has a 21 day window to get them released), doing so is fairly difficult and can require a fairly proactive approach when dealing with IRS collections. Furthermore, even if the property that you have is on the above list, it is nevertheless important to be vigilant when dealing with your collection issues. Quick and decisive action on the part of the taxpayer can help stop tax levies even before they are initiated by the IRS.
For help with tax levies or, if I can answer any additional questions, please contact me through the contact information listed on this website.
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IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter contained in this website.