What Is a Tax Levy?

The Internal Revenue Service (IRS) has broad powers available to collect taxes owed that are not paid. When demands for collection fail, the most commonly used power is a tax levy. A tax levy means the IRS can confiscate and sell property necessary to satisfy a tax debt. The IRS can levy your bank accounts, retirement accounts and any other assets you may own including your car, your boat and real estate. The IRS may even levy your wages or any other income you are receiving to protect the government's collection interests.

The 10 Most Important Thing to Know About An IRS Garnishment or Tax Levy

1. The IRS can levy income or assets where (1) you have been assessed a tax liability and (2) the IRS has demanded payment;
2. An IRS levy can result in the garnishment of your bank assets (including bank accounts, investments, boat, car and even a seizure and sale of your home;
3. If a bank account is levied, it only be applied to money that is already in the account when the levy is served – it does not affect money that you may deposit later;
4. The IRS can place a continuous levy against your personal and business income -- where the levy attaches to future paychecks (wages, salaries, bonuses and commissions) until the levy is released;
5. The IRS levy is improper where you have not received a Final Notice of Intent to Levy, Notice of Your Right to a Hearing, Notice and Demand for Payment, Notice of Intention to Levy, and a Notice of Your Right to a Collection Due Process Hearing;
6. You have a right to appeal all IRS levy actions;
7. You have the right to redeem levied property;
8. You have 30 days to make payment after the final notice of levy is issued;
9. The notice and demand for payment must be left at your home or business or mailed to your last known address;
10. There is judicial review of an adverse IRS appeal decision for "abuse of discretion."
11. In certain cases (below), the IRS is prevented from placing a levy

When Is the IRS Prevented from Levying Income or Assets?

The IRS is prevented from a levy on income or assets where:

1. During the period that an offer-in-compromise is pending with the IRS During the period that on offer has been made to pay your tax liability in an Installment Agreement
2. If it is not economical for the IRS to impose the levy
3. During the period you are in bankruptcy If you have a tax matter pending in a Federal court
4. If the property or income is exempt from levy If property subject to levy is subject to a prior perfected lien If your tax liability has been satisfied or becomes unenforceable by reason of the statute of limitations
5. If the levy is on any tangible personal property essential in carrying on your trade or business
6. If release of the levy will facilitate collection by the IRS If the levy has created an economic hardship due to your financial condition.

What Can You Do?

The most obvious cure is to pay your taxes. The Internal Revenue Service (IRS) must release your tax levy or lien if you pay your tax, penalty and interest owed in full. If you can show that the taxes were paid before the date of the levy, or the tax was assessed and the levy notice was sent while you were in bankruptcy, you may possibly be able to avert the federal tax levy. You may also be able to stop a tax levy where the time to collect the tax has expired before the levy notice was assessed.

You may also qualify for relief where you can show that the tax levy creates a significant economic hardship for you.

Most taxpayers intend to pay their taxes, but are often just requiring a little more time. When you can't pay your taxes, the IRS will release a tax levy where you can enter into an agreement to pay the taxes over time or otherwise settle the taxes owed. Current economic conditions have prompted the IRS to structure extremely generous payment terms with qualifying taxpayers like never before but you must be proactive!

When dealing with the IRS, always hire a tax professional; one skilled, experienced and knowledgeable in current tax law, taxpayer rights and IRS representation.  Know your taxpayer rights.  Pay close attention to deadlines and important dates.  Be proactive!