What to Do About An IRS Levy

What Is An IRS Levy?

It is a legal seizure of your property to satisfy a tax debt. It is the same thing as a garnishment or an attachment.

When this action is started, it is a last resort. It means that communications between you and IRS have broken down and that IRS doesn't know what you intend to do about unpaid taxes.

The garnishment is a demand made by IRS on a third party, like an employer, a bank, a brokerage house, or anyone else that IRS can locate that is holding assets you own.

How Is It Different From A Tax Lien?

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

What Are The Different Types Of Tax Levies?

The most common are on (1) salaries and wages, and (2) bank accounts.

Wage levies are continual. Once in place, the employer must continue to withhold from your wages until the the garnishment is either satisfied or released. There is a small amount that you may keep for yourself, but it is far beneath the minimum wage.

Also remember that you remain responsible for income tax on the full amount you are paid.

As with a bank levy, the employer must hold the funds until 21 days after the levy date. Then the money must be sent to IRS.

In the case of a levy on a time deposit, the bank must also deduct the 10% penalty for early withdrawal if it applies and then send the remaining balance to IRS.

Can You "Get Back" Funds That Have Been Seized?

It is very difficult to retrieve funds impounded by the employer or financial institution. It can be done, but in most cases requires the intervention of a tax professional and possibly the Taxpayer Advocates Office.

How Is An IRS Levy Satisfied?

The levy is satisfied when all tax, including penalties and interest, is paid if full or when the IRS withdraws the levy order.

The levy order can be withdrawn if IRS agents believe you are trying to comply with your tax obligations.

In the mind of IRS, "compliance with your tax obligation" means that you have:

(1) paid in full;

(2) entered into an installment agreement;

(3) submitted an Offer in Compromise;

(4) been placed in non-collectible status because you don't have enough money to pay the back taxes.

What Are Possible Results Of An IRS Levy?

A levy may result in you being unable to make mortgage payments or pay the rent or car payments.

You May Need A Tax Expert To Help Release An IRS Levy