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Facing a Tax Levy on a Single Member LLC

May 31st, 2011
Facing a Tax Levy on a Single Member LLC

If you own a single member LLC and owe personal back taxes, there are certain ways the IRS can and cannot leverage your business assets to secure the money.

First, the IRS cannot put a tax levy on a disregarded single member LLC for personal taxes due by the sole owner. This is per a recent statement by the IRS. A tax levy allows the IRS to seize property to satisfy a tax liability without going through the court system. The IRS can levy upon wages, bank accounts, social security payments, accounts receivable, insurance proceeds, real property, and even personal residences (in extreme cases). But, according to the IRS, a disregarded single member LLC is exempt from this list.

However, it's possible the IRS could put a tax levy on LLC payouts, particularly if net income from the single member LLC is being used as the owner’s sole source of income. Additionally, assets like a merchant’s credit card account including the contents of a “reserve account” or “charge-back account” can be seized.

The laws regarding tax problems plaguing owners of single member LLC entities can be confusing. But finding out your options when a tax levy has been put into effect is best done sooner rather than later. You only have nine months to claim a wrongful tax levy. After that, the IRS cannot return your money, mistake or not.

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