What you need to know about an IRS Tax Levy
IRS tax levies can be devastating to anyone in the country. They rarely, if ever, come at a good time. Most Americans live paycheck to paycheck. Even those people who are able and disciplined enough to save money can be negatively affected by just a single IRS tax levy.
Anytime a paycheck or bank account is garnished by the IRS, someone will need an IRS tax levy release….. and that person will usually need it very quickly so that the bills can paid and the food can be put on the table. If you’ve been hit with an IRS wage garnishment for your unpaid federal income taxes, don’t despair! Even if you have not filed tax returns for several years, it is still possible to get the IRS to release your wage garnishment and file all your tax returns.
IRS has certain rules and regulations that they must follow to determine how much of your money they can get every month.
Since you are probably totally unaware of what those rules and regulations are, you are at a tremendous disadvantage if you talk to one of these IRS representatives. We always recommend using an educated and knowledgeable tax service who will ensure you get the best deal possible.
Most people will be negotiated into a monthly payment arrangement of some kind that is referred to as an IRS Installment Agreement. Qualifying for such a monthly payment plan requires a very detailed financial calculation that considers all of your income and all of your “allowable monthly living expenses.” Determining which expenses are allowable is very tricky and requires a lot of knowledge of the how the IRS Collection system works.
The IRS will add up all of your sources of monthly income to determine your Total Gross Monthly Income. Then they will deduct your federal and state income tax withholdings and payroll taxes to arrive at your Net Available Income. After your Net Available Income is calculated, the IRS will then discuss with you each and every one of your monthly living expenses. These expenses will include housing and utilities, medical expenses, child care, life insurance, court-ordered payments, automobile expenses, credit card payments, child support, car note payments, and many others.
There just isn’t going to be much room for negotiation when trying to obtain an IRS tax levy release.
Many of your monthly living expenses will be completely allowable; but you will also have some expenses that can and will be disallowed in the determination of your ability to pay the IRS any monthly amount. You will also have upper allowable limitations on some of your monthly expenses so that if you spend say, more than $517 per month on your car payment, then you will be limited to only $517 in determining the allowable portion of that car payment. You may disagree with your IRS rep about their determinations of what is allowed and disallowed, but remember that your rep must follow the procedures and calculations that have been designed by the IRS.
Once your Total Allowable Living Expenses are determined, the IRS will then deduct that expense total from your Net Available Income. The resulting number is called your Monthly Net Cash Flow and is basically your income minus your monthly expenses that the IRS allows.
So the calculation is like this:
All sources of income minus payroll taxes and withholding and other pay stub deductions = Net Available Income. Then Net Available Income minus Allowable Living Expenses = Monthly Net Cash Flow.
Your Monthly Net Cash Flow will show your required monthly payment to the IRS to pay off all your taxes. You obviously will want your monthly payment to the IRS to be as small as possible, but the IRS will always want your monthly payment to be high. Remember, the goal here is to get your Allowable Monthly Living Expenses to be as high as possible. Determining allowable expenses in an advantageous way is very difficult, especially to someone who isn’t familiar with tax law. The entire process can be overwhelming, so if you choose to not use a tax negotiation professional, make sure you are confident in understanding exactly what will be needed when obtaining an IRS tax levy release.