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Tax Help FAQs: IRS Bank Levy

What is an IRS Bank Levy?

An IRS levy is a legal seizure of your property to satisfy a back tax debt. Levies are different from liens. A lien is a claim used as security for the back tax debt, while a levy actually takes the property to satisfy the tax debt.

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,

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

IRS could 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).

If the IRS levy your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy.

When will the IRS usually levy?

Only after these three requirements are 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 back tax; and
• 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.
  
  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:
  
  
• You paid all you owed before the IRS sent the levy notice,
  
  
• The IRS assessed the back tax and sent the levy notice when you were 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 we sent the levy notice,
  
  
• You did not have an opportunity to dispute the assessed liability,
  
  
• You wish to discuss the collection options, or you wish to make a spousal defense.
  
  What happens at the conclusion of the appeals hearing?
  
  
• The Office of Appeals will issue a determination.
• You will have 30 days after the determination date to bring a suit to contest the determination.
• If your property is levied or seized, contact the employee who took the action.
• You also may ask the manager to review your case.
• If the matter is still unresolved, the manager can explain your rights to appeal to the Office of Appeals.
• When does an IRS levy of your wages or your bank
  
  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.
  
  

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  The 10 most important things you need to know about an IRS Levy
  
  
• The IRS has the authority to levy income or assets if you have been assessed a tax liability and the IRS has demanded payment.
  
  
• An IRS bank levy can result in the garnishment of your bank assets (including bank accounts, investments, etc., and could result in the seizure and sale of your home. If a bank account is levied, it only reaches money in the account when the IRS bank levy is served - it does not affect money deposited later...
  
  
• An IRS levy can result in a continuous levy against your personal and business income. It attaches to future paychecks until the levy is released. Wages and salary include fees, bonuses, and commissions.
  
  
• The IRS is prevented from a levy on income or assets:
  
  a) During the period that an offer-in-compromise is pending with the IRS
  
  b) During the period that on offer has been made to pay your back tax liability in an Installment Agreement
  
  c) If it is not economical for the IRS to impose the levy
  
  d) During the period you are in bankruptcy
  
  e) If you have a tax matter pending in a Federal court.
  
  f) If the property or income is exempt from levy.
  
  g) If property subject to levy is subject to a prior perfected lien.
  
  h) If your back tax liability has been satisfied or becomes unenforceable by reason of the statute of limitations.
  
  i) If the IRS levy is on any tangible personal property essential in carrying on your trade or business.
  
  j) If release of the levy will facilitate collection by the IRS .
  
  k) If the levy has created an economic hardship due to your financial condition. Economic hardship will be established if the IRS takes property or income for the cost of food, clothing, housing, transportation, medical, child support, court ordered payments, and other and other reasonable and necessary living expenses.
  
  
• The IRS levy is improper unless you have received a Final Notice of Intent to Levy and Notice of Your Right to a Hearing in a Notice CP 90 or CP 297. Before property can be levied, you must be given a Notice and Demand for Payment, a Notice of Intention to Levy, and a Notice of a right to a Collection Due Process hearing.
  
  
• You have a right to appeal all IRS levy actions.
  
  
• have the right to redeem levied property.
  
  
• You have 30 days to make payment after the final notice of an IRS levy is issued.
  
  
• The notice and demand for payment must be left at your home or business, or mailed to your last known address.
  
  
• There is judicial review of an adverse IRS appeal decision for "abuse of discretion."