What is a Levy?
A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien does not have to be filed with the county recorder for the IRS to enforce a levy.
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 in which you have an interest. 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 taxpayers paycheck?
This is a formula driven process, however, the typically amount is 30-70% of the net 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
- The time expires for legally collecting the tax