What Is An IRS Tax Levy? - Roni Deutch

What Is An IRS Tax Levy?

What Is An IRS Tax Levy?

A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.

If you do not pay your taxes (or make arrangements to settle your debt), the Internal Revenue Service (IRS) may seize and sell any type of real or personal property that you own or have an interest in. For instance, the IRS can seize and sell property that you hold (such as your car, boat, or house). IRS can also levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).

The IRS usually levies only after these three requirements are met:

  • The IRS assessed the tax and sent you a Notice and Demand for Payment
  • You neglected or refused to pay the tax
  • The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.

The final notice may be given in person, left at your home or usual place of business, or sent to your last known address by certified or registered mail, return receipt requested.

You may ask an IRS manager to review your case, or you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a Collection Due Process hearing with the IRS office listed on your notice. You must file your request within 30 days of the date on your notice.

If the IRS levies your wages, salary, or federal payments, the levy will end when:

  • You pay your tax debt in full
  • The time expires for legally collecting the tax
  • The levy is released

The IRS will release a levy on income if the taxpayer resolves their back tax liability through an Installment Agreement, Currently Not Collectible status, or an Offer in Compromise. If the IRS levies your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows time to resolve any issues about account ownership. After 21 days, the bank must send the money plus interest, if it applies, to the IRS.

The IRS typically will not release a levy upon a bank account once it has been issued. However, the IRS may partially release the levy if the funds in the account are needed for a specific and necessary living expenses. Examples include medical expenses, housing expenses, and transportation expenses (for employment or health reasons).