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Jeopardy levies are a type of tax levy that can be used by the Internal Revenue Service (IRS) to collect outstanding tax debts from individuals or businesses. These levies allow the IRS to seize assets, such as bank accounts, wages, and property, in order to satisfy a tax debt. In this FAQ, we'll take a basic look at jeopardy levies and how they work.
A jeopardy levy is typically used in situations where the IRS believes that a taxpayer may be attempting to hide assets or transfer them to someone else in order to avoid paying their debt. The Internal Revenue Manual provides that a jeopardy levy may be issued when taxpayers are:
A jeopardy levy allows the IRS to seize a taxpayer's assets without prior notice or a court order. This means that the IRS can take immediate action to collect the tax debt, rather than having to go through the traditional collection due process hearing, in which the taxpayer has substantial rights including an opportunity to petition the United States Tax Court.How Does a Jeopardy Levy Work?
When the IRS issues a jeopardy levy, it will essentially freeze the taxpayer's assets and then notify them of the levy. The taxpayer will then have a limited amount of time to respond to the levy and attempt to have it lifted.
In some cases, the IRS may also seize assets that are held in the name of third parties, such as family members or business partners. This can occur if the IRS believes that the taxpayer is attempting to hide assets by transferring them to someone else.What Are the Consequences of a Jeopardy Levy?
The consequences of a jeopardy levy can be severe for taxpayers. If the IRS seizes a taxpayer's assets, they may be left without the means to pay for basic necessities, such as food and housing.
In some cases, a jeopardy levy can also result in the closure of a business. If the IRS seizes a business's assets, it may not be able to continue operating, which can result in the loss of jobs and income for employees.What Are the Legal Rights of Taxpayers?
Taxpayers do have legal rights when it comes to jeopardy levies. They have the right to appeal the jeopardy levy and have it reviewed by an independent appeals officer.
If a taxpayer believes that the IRS has made an error in issuing the levy, they can also file a lawsuit in federal court to challenge it. This can be an expensive process, but it may be necessary
It's important to note that taxpayers have a limited amount of time to respond to a jeopardy levy-generally 30 days. If they do not take action within the designated time frame, the IRS may proceed with seizing their assets, and the taxpayer may be limited to filing a refund claim to recoup the funds.
The Independent Office of Appeals has a limited window of time to make its decision. If Appeals does not make a decision, then on the 16th day after the appeal is filed then a taxpayer may file suit in district court to overturn the IRS' decision. Alternatively, if the decision of Office of Appeals is unfavorable, then the taxpayer has 90 days from the notice of decision to file suit in district court. There are limited situations in which the Tax Court has jurisdiction to hear a case involving a jeopardy levy.How Can Taxpayers Avoid a Jeopardy Levy?
The best way for taxpayers to avoid a jeopardy levy is to pay their taxes on time and in full. If they are unable to pay their taxes, they should contact the IRS to discuss payment options, such as installment agreements or an offer in compromise.
It's also important for taxpayers not to misrepresent their financial situation to the IRS. Attempting to hide assets or transfer them to someone else in order to avoid paying taxes can result in severe consequences, including a jeopardy levy, and even criminal prosecution. Taxpayers who have significant financial issues which prevent them from paying their tax debts in full can almost always negotiate a resolution with the IRS as long as they proper representation.Conclusion
A jeopardy levy is a powerful tool that the IRS can use to collect tax debts from individuals or businesses who are attempting to put their assets out of the reach of the IRS. While jeopardy levies can have severe consequences for taxpayers, they do have legal rights that can help them challenge or appeal the levy. The tax litigation attorneys at Brager Tax Law Group, have the right kind of experience to assist their clients navigate jeopardy levies, and to avoid having jeopardy levies served.