If you owe the Internal Revenue Service a substantial amount of back taxes, you'll probably want to know about how you can avoid a tax levy. Generally, by the time the IRS issues a tax levy, your tax bill will have increased significantly due to back penalties and interest, so it's in your best interest to avoid a levy at all costs.

How a Tax Levy Works

When the IRS issues a tax levy, the agency essentially becomes a payee of all of your income and property. This means that when you receive a paycheck, the IRS receives a large portion of the proceeds before you receive any of the funds. This same principle applies to self-employment earnings, Social Security benefits and pension payments from retirement plans. Even worse, your employer receives a notice of the levy so that he or she can make the necessary withdrawals. As a result, your personal financial situation may become a source of office gossip.

Who Might Be Subject to a Levy

If you owe back taxes and you're making installment payments to the IRS, you probably won't have to worry about a levy. However, if you owe outstanding taxes and you haven't made any attempts to repay your balance due, you might be at risk for a tax levy. Because the IRS has the authority to issue a levy on any person who is delinquent on their tax payments, it's essential that you communicate with the agency directly to inform them of your intent to repay your tax bill.

How a Tax Levy Affects You

As mentioned before, tax levies have an immediate impact on your financial well-being, since they cut into your income sources. The IRS can also place a levy on your bank account, your home and other property, including your insurance policies and your jewelry. However, the agency cannot touch your personal effects such as your clothing and furniture. If you're receiving unemployment benefits, court-ordered child support or public assistance these assets are generally exempt from the levy. If you decide to appeal your IRS levy, you'll have 30 days from the date the levy is issued to request your hearing.

While an IRS tax levy can put a strain on your financial situation, you don't have to face it alone. An experienced tax resolution specialist can help remove tax levies and help plan your appeal and advise you on how to make a convincing argument during your hearing.