What is an IRS Tax Levy?

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

The IRS is required to inform you of a levy by sending a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the IRS levy is put in place. They may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested.

However, it is important to understand that although the IRS is required to make an effort to notify you of the levy, if the notice of levy never makes it to your doorstep, the IRS can still levy your wages and personal property. The IRS is only required to make sufficient effort to notify you through your last known address. This means, potentially, that you may not actually receive this notification.

A Tax Levy is Legal: Learn How It Works

If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in. While real estate seizure is usually a last resort on their end, levies of wages or bank accounts are far more common.

Levy examples include:

  • Seize and sell property that you hold (such as your car, boat, or house).
  • 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).

There are two main types of levies: Bank and Wage.

Bank Levies are usually a one-time sweep of your account and the funds are in most cases impossible to recoup. The IRS can take up to the full amount you owe, potentially leaving your account with nothing. If the IRS does levy your bank account, you must act quickly. The day you receive a 668A letter, your account will be frozen. If a bank levy is possible to be released, it must be done within 21 days.

Wage Levies, sometimes called wage garnishments, are a continuous deduction of monies from your income.

  • If you are a business owner, the levy applies to your accounts receivable.
  • If you are a wage earner (W-2 employee), a wage garnishment is a continuous deduction to your paycheck, of which the IRS can take up to 85%.

How to Stop an IRS Levy

In the case of both Bank and Wage levies, the levy can or will continue until it is released either through a resolution plan or fully paying your tax debt.

Further Reading

Working With the IRS Levy

Levy Solutions