Why Virginia Uses Tax Levies When You Owe Back Taxes
Tax Lien Attorney

When it comes to collecting unpaid taxes, the state of Virginia has various tools at its disposal to ensure compliance. One of the most significant and impactful methods is the use of a tax levy. If you owe back taxes to the state of Virginia, you may find yourself subject to this enforcement action, which allows the state to seize assets, garnish wages, or levy bank accounts to collect the unpaid debt. If you have received notification from the state of Virginia regarding a levy, Sodowsky Law Firm can help you navigate the process and better understand how to limit the damage.

Tax levies can be an overwhelming experience for individuals and businesses alike, often leaving them feeling helpless and unsure of how to resolve their tax issues. This article will provide a comprehensive overview of why Virginia employs tax levies when you owe back taxes, how the levy process works, and what steps you can take to protect your assets and resolve your tax debt.

What is a Tax Levy?

A tax levy is a legal seizure of your property or assets to satisfy a tax debt. Unlike a lien, which is a legal claim against your property as security for a debt, a levy actually takes the property to pay off the debt. Levies can result in the garnishment of wages, the seizure of funds from your bank account, or the taking of personal or business assets.

Virginia’s Department of Taxation (also known as Virginia Tax) has the authority to issue tax levies when you owe back taxes and have not made arrangements to resolve the debt. Tax levies are usually seen as a last resort, after the state has made multiple attempts to collect the taxes owed through notices and demands for payment.

Why Does Virginia Use Tax Levies?

Virginia, like other states, relies on tax revenue to fund essential public services, including education, transportation, healthcare, and public safety. When individuals or businesses fail to pay their taxes, it creates a shortfall in the revenue the state needs to operate effectively. To ensure that taxes are paid and the state can meet its financial obligations, Virginia uses tax levies as an enforcement tool to collect unpaid taxes.

Here are some of the primary reasons why Virginia uses tax levies:

  1. Ensuring Compliance with Tax Laws

Tax levies serve as a powerful enforcement mechanism to encourage compliance with tax laws. When taxpayers fall behind on their obligations, the state needs a way to compel them to pay. A tax levy is one of the most effective ways to do this, as it directly impacts the taxpayer’s assets and income, creating an urgent need for them to resolve their tax issues.

  1. Recouping Unpaid Revenue

Virginia uses tax levies to recover unpaid revenue that is crucial to the state’s budget. When individuals or businesses fail to pay taxes, it creates a funding gap that can affect the delivery of public services. By using tax levies, the state can recoup the money it is owed, ensuring that vital programs and services continue to operate.

  1. Discouraging Future Noncompliance

Tax levies also serve as a deterrent to other taxpayers. When individuals and businesses see that Virginia is willing to take aggressive action to collect unpaid taxes, it discourages them from attempting to evade their own tax obligations. This enforcement action sends a clear message that failing to pay taxes will result in serious financial consequences.

  1. Addressing Long-Term Tax Debts

Virginia typically resorts to tax levies after a taxpayer has ignored repeated attempts to collect the debt. In many cases, these debts have been outstanding for months or even years. A tax levy allows the state to take immediate action to resolve long-standing debts and prevent them from growing further due to interest and penalties.

How Does the Tax Levy Process Work in Virginia?

Before the state can levy your assets, Virginia Tax must follow specific procedures to ensure that taxpayers are given notice and the opportunity to resolve their debt. The process generally involves the following steps:

  1. Assessment of Tax Debt

The process begins when Virginia Tax determines that you owe back taxes, either through an audit, self-reported tax return, or failure to file a return. The state will assess the amount of tax owed, including any penalties and interest that may apply.

  1. Notice of Tax Due

Virginia Tax will send you a notice of tax due, which outlines the amount you owe, the tax period in question, and the deadline for making payment. This notice is typically the first formal communication you will receive from the state regarding your tax debt.

  1. Demand for Payment

If you fail to pay the amount due by the deadline specified in the notice, Virginia Tax will issue a demand for payment. This demand serves as a final warning before enforcement action is taken. It will clearly state that if the debt is not paid or arrangements are not made, the state may issue a levy to collect the unpaid taxes.

  1. Issuance of a Tax Levy

If the taxpayer ignores the demand for payment, Virginia Tax will move forward with issuing a tax levy. The levy may be placed on various assets, including:

  • Wages: The state can garnish a portion of your wages directly from your employer until the debt is satisfied.
  • Bank accounts: Virginia Tax can seize funds from your bank accounts to cover the amount of taxes owed.
  • Personal property: In some cases, the state may seize personal property such as vehicles or real estate.
  • Business assets: If you are a business owner, the state can levy business assets, including inventory and equipment.
  1. Notice of Levy

After a levy has been issued, you will receive a notice informing you of the action. This notice will detail which assets or income streams are being seized and how much of your debt the state intends to collect.

  1. Resolution and Release of Levy

Once the tax debt is paid in full, including any interest and penalties, the state will release the levy. If you cannot pay the full amount, you may be able to negotiate an installment agreement or offer in compromise to settle the debt. Once an agreement is reached, the levy will be lifted.

Your Rights as a Taxpayer: What You Can Do If Facing a Levy

Facing a tax levy can be stressful and overwhelming, but it’s important to understand that you do have rights and options. Here’s what you can do if you’re facing a tax levy in Virginia:

  1. Respond to Notices Promptly

The best way to avoid a tax levy is to respond to notices from Virginia Tax as soon as possible. If you receive a notice of tax due or a demand for payment, contact the state immediately to discuss your options for paying the debt. Ignoring these notices will only escalate the situation.

  1. Request a Payment Plan

If you are unable to pay your tax debt in full, you can request a payment plan from Virginia Tax. This will allow you to make monthly payments over time, avoiding a levy while you work to resolve the debt.

  1. Offer in Compromise

In some cases, you may be eligible to negotiate an offer in compromise, which allows you to settle your tax debt for less than the full amount owed. Virginia Tax will consider factors such as your ability to pay, income, and assets when evaluating whether to accept an offer in compromise.

  1. File an Appeal

If you believe that the tax levy is unjustified or that there has been a mistake in the assessment of your tax debt, you have the right to appeal the levy. Filing an appeal will temporarily stop the enforcement action while your case is reviewed.

  1. Seek Professional Help

Navigating the tax levy process can be complicated, especially if you owe a significant amount of back taxes. Seeking the help of a tax attorney can make a big difference. These professionals at Sodowsky Law Firm can negotiate on your behalf, help you file appeals, and guide you through the process of resolving your tax debt. Call our firm today; we will be happy to help.