What is a Levy or Garnishment?

A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens.

What is a Lien?

A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.

What happens 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. For instance,

The IRS can seize and sell property that you hold (such as your car, boat, or house), or 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).

When will the IRS usually levy?

Only after these three requirements have been met:

The tax has been assessed and the taxpayer has been sent a Notice and Demand for Payment
You neglected or refused to pay the tax
The IRS has 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 IRS 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.

What is the typical amount levied/garnished from a taxpayer’s paycheck?

This is a formula driven process, however, the typically amount is 30-70% of the gross paycheck.

Can a Levy be appealed?

Yes. In most cases, our clients retain us to request a Collection Due Process hearing with the Office of Appeals. Grounds for appeals include:

The taxpayer has paid all taxes owed before the IRS sent the levy notice
The IRS assessed the tax and sent the levy notice when the taxpayer was in bankruptcy, and subject to the automatic stay during bankruptcy
The IRS made a procedural error in an assessment
The time to collect the tax (called the statute of limitations) expired before the IRS sent the levy notice
The taxpayer did not have an opportunity to dispute the assessed liability
The taxpayer wants to discuss collection options
The taxpayer wants to make a spousal defense.

What happens at the conclusion of the appeals hearing?

The Office of Appeals will issue a determination.
The taxpayer has 30 days after the determination date to bring a suit to contest the determination.
If the taxpayer’s property is levied or seized, contact the employee who took the action.
The taxpayer also may ask the manager to review their case.
If the matter is still unresolved, the manager can explain the taxpayer’s rights to appeal to the Office of Appeals.

When does an IRS levy of your wages or your bank account end?

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

The levy is released,
You pay your tax debt, or
The time expires for legally collecting the tax.

If the IRS levy your bank account, how long must your bank hold funds you have on deposit?

Up to the amount you owe, for 21 days.
This period allows you time to solve any problems from the levy.
After 21 days, the bank must send the money plus interest, if it applies, to the IRS.
To discuss your case, call the IRS employee whose name is shown on the Notice of Levy.

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