A Tax Levy is one of the main tools used by the IRS to collect on taxes owed. There are many different forms a tax levy can take and all of them can be a burden on you financially as well as damaging your credit.
When the IRS files a tax levy against you they basically jump to the front of the line for any debt that you owe and demand payment right then. If you don’t pay them they will take action against you by enforcing this levy.
The IRS can levy your property, bank accounts, wages and future tax refunds. By putting a levy on your property the IRS essentially takes control of that property. You cannot sell the property without first getting permission from the IRS. In extreme cases they may take ownership of the property and sell it in an effort to recoup money owed them.
A bank levy takes place when the IRS seizes control of your bank accounts. They contact your bank and require them to put a freeze on any and all money you have in those accounts. The bank must then turn that money over to the IRS within 21 days unless the IRS notifies them otherwise.
Typically the IRS will also levy your future tax returns to settle your tax debt so if you were expecting a refund the IRS can take that refund and apply it to the taxes you owe.
Once a tax levy is filed it becomes public record and will appear on your credit report which can cause you serious problems getting future credit.