Levy

Definition

A levy is a legal assessment or collection by authorities, typically by a government agency, to impose a tax, fee, or fine. It can also refer to the act of seizing property to satisfy a debt. Levies are a fundamental mechanism for raising government revenue and ensuring compliance with legal and financial obligations.

Examples

Tax Levy: The Internal Revenue Service (IRS) in the United States may impose a levy on an individual’s wages to collect unpaid taxes.
Property Levy: A city government might levy a property tax to fund public services like schools and infrastructure.
Court-Ordered Levy: If a person fails to pay a court judgment, the court could order a levy on their bank account to satisfy the debt.
Seizure of Assets: Law enforcement agencies might levy a seizure on assets of a criminal as part of forfeiture proceedings.

Frequently Asked Questions

What is a levy?

A levy is both an act and a process where a government or a legal authority imposes a tax, fee, fine, or seizes property in order to collect unpaid debts or obligations.

How is a levy different from a lien?

A levy is the actual collection or seizure of property, while a lien is a legal claim or hold on property as security for a debt or obligation. A levy can be executed to satisfy a lien.

Can a levy be contested?

Yes, individuals or entities subject to a levy can contest it through legal means, by proving that the levy is incorrect or by arranging payment plans.

What types of levies can the IRS impose?

The IRS can levy wages, bank accounts, Social Security benefits, and other personal property and real estate to collect unpaid taxes.

How does a property tax levy work?

A property tax levy is imposed by local governments based on the assessed value of property. The collected taxes are utilized to fund local public initiatives, such as schools, infrastructure, and law enforcement.

Lien: A legal claim or right against property that must be paid off when the property is sold.
Garnishment: A legal process where a portion of an individual’s wages is withheld by an employer for the payment of a debt.
Assessment: The determination of the amount of tax owed, often based on the value of property or income.
Forfeiture: The loss of property or money because of a breach of law, typically used in criminal contexts.

Online References

Suggested Books for Further Studies

“Taxing America: Wilbur Mills, Congress, and the State, 1945–1975” by Julian E. Zelizer
“Tax Levy Protection: How to Protect Your IRS Tax Problems and Get a Fresh Start” by Amy North
“The Law of Property Taxation” by Hoyt Sherard and Charles R. Pugh

Fundamentals of Levy: Taxation Basics Quiz

### What purpose does a levy usually serve for a government? - [x] To collect revenue - [ ] To penalize crimes - [ ] To measure property value - [ ] To provide insurance > **Explanation:** A levy serves to collect needed revenue for the government through taxes, fees, or fines. This revenue is used to fund various public services and obligations. ### What action does a 'court-ordered levy' typically entail? - [ ] Placing a lien on property - [ ] Filing a lawsuit against the debtor - [x] Seizing the debtor's assets or bank accounts - [ ] Reviewing the debtor’s tax returns > **Explanation:** A court-ordered levy often involves the seizing of a debtor's assets, such as bank accounts, to satisfy an unpaid judgment or court order. ### What is a major difference between a lien and a levy? - [ ] A lien is immediate, a levy is delayed - [x] A lien is a legal claim, a levy is collection - [ ] A lien can’t be contested, a levy can - [ ] A lien only applies to real estate, a levy applies to all assets > **Explanation:** A lien is a legal claim or hold on property as security for a debt, while a levy is the actual seizure or collection of property to satisfy that debt. ### Who can impose a tax levy in the United States? - [ ] Only state governments - [x] Federal and state governments - [ ] Private individuals - [ ] Non-profit organizations > **Explanation:** Both federal and state governments in the United States have the authority to impose a tax levy. ### What is commonly levied by the IRS to collect unpaid taxes? - [ ] Unassessed property - [x] Wages and bank accounts - [ ] State income taxes - [ ] Non-governmental fees > **Explanation:** The IRS commonly levies wages and bank accounts to collect unpaid federal taxes. ### If a property tax levy is imposed, what is it based on? - [ ] The owner's income - [x] The assessed value of the property - [ ] The age of the property - [ ] The length of residence by the owner > **Explanation:** A property tax levy is based on the assessed value of the property and is used to support local government services. ### What can an individual do if they wish to contest a levy? - [ ] Ignore it and continue usual activities - [x] Prove the levy is incorrect or arrange payment plans - [ ] Request relief from municipality authorities - [ ] Switch financial institutions > **Explanation:** An individual can contest a levy by proving that it is incorrect or by arranging payment plans with the relevant authorities. ### Which of the following best defines a property levy? - [ ] The eviction of tenants - [x] The imposition of a tax on property - [ ] The rental of commercial buildings - [ ] The clean-up of lands > **Explanation:** A property levy typically refers to the imposition of a tax on property by a government authority. ### Under what circumstances can a levy be used as a collection tool? - [ ] For verifying voter registration - [ ] For creating zoning laws - [x] For unpaid debts or obligations - [ ] For allocating public school placements > **Explanation:** A levy can be used as a collection tool for unpaid debts or obligations, such as taxes, fines, or court judgments. ### Why is garnishment closely related to a levy? - [ ] Both are forms of income tax regulations - [ ] Because it involves property claims - [x] Because it involves withholding an individual’s earnings - [ ] Both require court orders > **Explanation:** Garnishment is closely related to a levy because it involves withholding an individual's earnings, such as wages, to satisfy a debt or legal obligation.

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