That Just Got Spicy: Levies, Seizures, & Garnishments

Visual representation of taxation concepts in a word cloudBeing from Colorado, I’m both a mountaineer and a rock climber. The term “that just got spicy” hails from British rock-climbing lore, possibly from Edmund Hillary or someone like Mallory. They used it on Everest when they found themselves in the death zone, when they were running out of oxygen, when there were blizzards closing in, or when they lost a crampon. In classic British humor, they remarked, “Well, that just got a little spicy up there.” I always found that endearing, highlighting the understated humor the British have even in the face of significant and impactful situations.

To me, the things that “get a little spicy” in IRS collections are when the IRS has exhausted their last notice requirement without receiving what they needed or even hearing from the taxpayer. If they have heard from the taxpayer, it means the taxpayer hasn’t complied with their requests. In such cases, the IRS can take drastic actions – emptying bank accounts, seizing assets, garnishing wages, and sending levies to accounts receivable.

This can be particularly harmful to a company relying on accounts receivable. Not only can they lose the funds from these accounts, but those accounts may also sever ties. These are the critical issues in IRS collections for businesses that we work tirelessly to prevent. If a client does come to us with active levies, garnishments, or a seizure in progress, that’s when we muster all hands on deck to save the company from closure, ensure employee payroll is met, and protect innocent parties from harm.

The Timeline Leading Up To An IRS Levy Or Seizure

It can take the IRS up to three years before they send out the first notices for a levy, seizure, or garnishment. Typically, there’s a significant lead-up to a levy action, however, there are exceptions to this rule. Recently, we had a client where we’d submitted all the necessary financial documents and proposals, following the standard negotiation process. Surprisingly, a revenue officer jumped the gun without checking for existing files or a power of attorney, issuing several levies. The client realized this when he tried to use his debit card and found it empty. This was a concerning situation, not just for him but also for me, as it indicated a lack of proper representation.

We engaged in a professional yet heated conversation with the revenue officer. Subsequently, I had a follow-up conversation with his manager. Thankfully, they immediately released the levy and offered an apology. This incident emphasized the importance of having professional representation. However, it’s crucial to note that there are steps to prevent situations like this from arising.

Before a levy is issued, there are several notices sent out. The first notice can be paid, the second allows for discussions on payment arrangements, and the third, the final notice, can be appealed to avoid a levy. After the appeals process, there’s the final notice section. By responding promptly, filing taxes, and paying current taxes, negotiations with the IRS are possible. However, the Achilles’ heel of any installment agreement or negotiation is continued tax accrual. If you fail to file or pay current taxes, the IRS is legally barred from setting up an agreement. Revenue officers are then obligated to move forward with levies, even if they don’t want to, as they view your business as failing.

Tax Relief Programs And Options For Businesses To Negotiate An Installment Agreement Or Other Resolution Through The IRS

In this industry, I’ve learned that the IRS and state agencies can sometimes act vindictively or irrationally. Here’s a story to illustrate my point. We had negotiated a payment arrangement with a client, and everything had been submitted to the state agent for approval. We were awaiting their response, when unbeknownst to the client, their payroll company failed to file a return at the end of the year, intending to do it after the holiday season.

On New Year’s Eve, I received a call from the client in a rather alarming situation. The state agent had shown up at the local bank and emptied their entire payroll account, which amounted to several hundred thousand dollars. This was done without any prior contact with me or the client. It was New Year’s Eve, and banks were closed all weekend. The client’s payroll for the holiday season had vanished. I found myself berating the state agent on my cell phone while watching a soccer game at a bar. Eventually, after considerable effort, I managed to get most of the money returned, but this incident taught me never to assume that the IRS or state agencies will be accommodating, even if they claim to be. Lesson learned. You must take charge of your own affairs, ensure proper filings, and follow your counsel’s advice to avoid such situations involving levies and seizures.

For more information on IRS Levies, Seizures, And Garnishments, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (303) 720-6573 today.