We focus on tax related issues, including civil and criminal tax controversies in West Hartford and across Connecticut and New York. We deal with taxpayers who have fallen into the IRS Collection Division’s inventory and are dealing with federal tax levies by the Internal Revenue Service (“IRS”). A question that comes up often is what can the IRS seize?
There are two types of federal tax levies issued by the IRS: a “regular” levy and a “continuing” levy. A continuing levy is a levy issued by the IRS on wages or routinely paid commissions, so it will remain in place until it is released.
A “regular” levy issued by the IRS reaches the assets owned by the taxpayer at the moment the levy is received. For example: Assume Taxpayer owes the IRS $10,000. Taxpayer has $100 in his bank account on Monday. Monday at 3:00 pm the bank receives a Notice of Levy from the IRS for the $10,000 that the federal government is owed. The taxpayer then deposits $10,000 in his account on Tuesday at 10:00 am. How much does the bank have to send to the IRS on account of the federal tax levy?
The bank will send the IRS the $100, which is the money it had at the moment the levy was received. The $10,000 deposited on Tuesday would not be reached by the federal tax levy. The situation is the same with contractors or receivables. The party that receives the tax levy only pays over to the IRS that amount which it owes the Taxpayer at that moment.
To illustrate this: If a general contractor receives a notice of tax levy from the IRS for one of its subcontractors, it can only pay that money which was owed to the subcontractor. If the general contractor did not owe the subcontractor anything (because the job was not complete and nothing was owed under the contract) than the tax levy would not get anything.
Eric L. Green, Esq.
Green & Sklarz LLC
543 Prospect Avenue
Hartford, CT 06105
Ph. (203) 285-8545
Fax (203) 286-1311