IRS Tax Levy

IRS Tax Levy What is an IRS Tax Levy?

An IRS tax levy is a legal seizure by the Internal Revenue Service of a taxpayer’s property to fulfill a tax debt. An IRS tax levy is different from a lien. A lien, unlike an IRS tax levy is a claim that is used as a security measure for the debt, while an IRS tax levy actually takes over the property in order to satisfy a tax debt.

If a tax payer does not pay his or her taxes, or if he or she does not make the proper arrangements in order to settle the debt, the IRS may decide to seize and resell any of personal or real property that the taxpayer owns or has an interest in.

Examples of this include:

• The IRS may seize and then sell the taxpayer’s property that the taxpayer previously held, such as a house, car or boat.

• The IRS can also levy taxpayer property that is lawfully the taxpayer’s but is held by another party. This can include salary, wages, dividends, bank accounts, retirement accounts, licenses, accounts receivable, rental income, commissions, or the cash loan amount of a life insurance policy. 

The IRS usually only levies after three specific requirements are met:

• The IRS has assessed the tax and has sent the taxpayer a Notice & Demand for Payment

• The taxpayer has refused or failed to pay the tax

• The IRS sent Final Notice of Intent to Levy as well as a levy notice titled the Notice of Your Right to A Hearing at the minimum of 30 days before the IRS tax levy. The IRS can then give the taxpayer this notice either in person, send it to the taxpayer’s last known address by registered mail or certified mail along with return receipt requested, or leave it at the taxpayer’s home or place of business. 

A taxpayer can ask an IRS manager to look over the taxpayer’s case, or can also request through the Office of Appeals a Collection Due Process hearing by filing out a request for a hearing with the specific IRS office that listed on received notice. A taxpayer must also file his or her request within 30 days of the date listed on the notice. Some potential issues that can be discussed at the hearing include:

• The taxpayer has paid all the owed prior to the IRS sending the levy notice.

• The IRS has assessed the tax and has sent the levy notice when the taxpayer was in bankruptcy, and thus subject to the automatic stay period during bankruptcy.

• The IRS made a procedural error in the assessment for the IRS tax levy.

• The statute of limitations or the time to possibly collect the tax expired before the IRS sent the IRS tax levy notice.

• The taxpayer was not given the chance to dispute the liability assessment.

• The taxpayer wants to discuss the collection options available.

• The taxpayer wants to request a spousal defense in response to the IRS tax levy.

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