Levies
If you have a tax debt, the IRS can issue a levy, which is a legal seizure of your property or assets. It is different from a lien — while a lien makes a claim to your assets as security for a tax debt, the levy takes your property (such as funds from a bank account, Social Security benefits, wages, your car, or your home).
The IRS can use a levy to satisfy a tax debt when you don't respond to notices informing you of the debt and asking for payment.
Some levies have a “one-time” effect, where the IRS takes an asset all at once.
A levy on your bank account takes only what is in the account at the time your bank receives the levy. The IRS must issue another levy if there are more funds in your account later.
Other levies have a continuous effect. They remain in place until the IRS releases the levy or your debt is paid in full. For example: If you have a levy on your wages or certain federal payments have a continuous effect.
A levy on your salary might take a portion of each paycheck until the IRS releases the levy - this is a continuous effect. By law, a portion of your wages is exempt from levy based on your filing status, additional standard deduction and dependents. To ensure the correct exemption amount is excluded from levy, your employer will ask you to complete a Statement of Exemptions and Filing status, Form 668-W, Part 3.
Your employer will use it (Form 668-W) to compute the exempt amount.
The IRS can also use the Federal Payment Levy Program (FPLP) to levy continuously on certain federal payments you receive such as social security benefits. Under this program, the IRS can generally take up to 15 percent of your federal payments (including Social Security), or up to 100 percent of payments due to a vendor for goods or services sold or leased to the federal government. A TAS brochure, What You Need to Know: the Federal Payment Levy Program can help you understand FPLP.
Other examples of assets the IRS might levy are your state tax refunds and payments you're to receive from clients (accounts receivable).
Note: For each tax and period, the IRS is generally required to notify you before the first time it collects or intends to levy and will send you a Notice of Your Right to a Collection Due Process Hearing (CDP).
First, to avoid levies: don't ignore IRS notices. They contain important information on how to prevent levy actions, and who to contact if you have questions. Call the number on the notice as soon as possible to avoid enforced collection. Also, keep your address up to date with the IRS so you receive all notices and other correspondence from the agency.
If you believe you don’t owe the tax to the IRS
You need to respond to the notice and tell the IRS why you think you don’t owe the debt. Be prepared to provide information to support your position. Find any IRS examination reports or IRS notices you have that explained the tax so you can to discuss it.
You can ask the IRS to delay enforcement of the levy to give you time to gather information to dispute the tax. You can also ask the IRS to help you understand why it assessed the tax.
If you want to pay your tax debt in a different way
If you’d like to propose an alternative method for paying your tax debt, you may need to provide financial information about your income, expenses, value of assets, etc. to enter into an installment agreement or possibly qualify for an offer in compromise.
Getting a levy released
The IRS must release a levy if it determines that:
- You paid the amount you owe.
- The period for collection ended before it issued the levy.
- It will help you pay your taxes.
- You enter into an Installment Agreement and the terms of the agreement allow the levy to be released.
- The value of the property is more than the amount owed and releasing the levy won’t hinder the IRS’s ability to collect the amount.
- The levy creates an economic hardship on you, meaning you’re unable to meet basic, reasonable living expenses. If a levy is causing a hardship, contact the IRS at the number on the levy or notice immediately.
Note: The IRS has Collection Financial Standards that help determine your ability to pay your taxes. Often, you'll need to prepare a financial statement to establish economic hardship.
If you're in bankruptcy, the IRS may not be able to levy your assets. Contact the IRS and provide information about your bankruptcy chapter, the filing date, the court where you filed, and the case number.
Be prepared to propose an alternative way to pay your taxes if you’re asking the IRS to release a levy.
If you're experiencing financial hardship and you haven’t been able to resolve the issue with the IRS, or if you’ve tried repeatedly to contact the IRS but no one has responded (or the IRS hasn’t responded by the date promised), or you believe an IRS system or procedure isn’t working as it should, contact the Taxpayer Advocate Service.
Getting levy proceeds returned
If the IRS issues a levy in violation of the law (for instance, if it issues the levy prior to providing you with Collection Due Process rights), the IRS will return the proceeds. If the levy wasn't in violation of the law, levy proceeds can be returned at the discretion of the Service if:
- The levy was premature or not in accordance with administrative procedures.
- You now have an installment agreement for the tax liability included on the levy, unless the agreement provides otherwise.
- Returning the payment will assist in other collection.
- With your or the National Taxpayer Advocate's (NTA) consent, returning the payment is in your (as determined by the NTA) and the government's best interest.
You must request return of levy proceeds timely depending on when the levy started. Since levies on wages and Social Security benefits are ongoing, it is important to timely ask the IRS to return the proceeds.
Paper wage levy
You have two years from the date your employer received the wage levy to request return payments from that wage levy. If, however, the wage levy was served on your employer on or before March 22, 2017, then you must have requested the return of the levy amount before December 23, 2017.
NOTE: If you paid bank charges because of a mistake the IRS made when it levied your account, you may be entitled to a reimbursement. Use IRS Form 8546, Claim for Reimbursement of Bank Charges.
Federal Payment Levy Program (FPLP)
The IRS may return FPLP proceeds that were collected up to two years prior to the date of your request.
Appealing the levy
Generally, the first time before it levies property to collect a tax debt, the IRS will send you a Notice of Your Right to a Collection Due Process (CDP) Hearing. You’ll have until the date shown on the notice to request a CDP hearing with the IRS Office of Appeals. See IRS Publication 1660, Collection Appeal Rights, for a full explanation of the CDP process.
At the CDP hearing, you can raise many issues, which include proposing another way to pay your debt, and in some cases, to contest the debt itself. After your hearing, the Office of Appeals will issue a determination. If you disagree with the determination, you have 30 days after it’s made to seek a review in the U.S. Tax Court. If your request for a CDP hearing isn't timely, you can request an Equivalent Hearing within one year from the date of the CDP notice, but you can't go to court if you disagree with Appeals' decision.
If the IRS has already issued a CDP notice for that particular tax debt, then you can still request a hearing with the IRS Office of Appeals either before or after the IRS levies your property. You will need to request a conference through the Collection Appeals Program (CAP), but unlike a CDP hearing, you may not seek review of Appeal’s determination in the U.S. Tax Court. See IRS Publication 1660, Collection Appeal Rights, for a full explanation of the CAP.
You can also informally ask an IRS manager to review your case – you can ask the employee listed on your notice. IRS employees are required to give you their manager’s name and phone number.
If you want professional representation
If you need a tax professional to represent you, you can hire an attorney, certified public accountant (CPA), or enrolled agent (EA). If you need a tax professional but can’t afford one, you may be able to get help from a Low Income Tax Clinic (LITC).
Some special situations
If the tax being levied is the result of an audit where you didn’t know you were audited (never got a notice), you didn’t participate, or you disagree with the findings, you may be able to ask for audit reconsideration.
If the tax being levied stems from the filing of a joint return and you believe your current or former spouse should be solely responsible for an incorrect item or an underpayment of tax on the return, you may be eligible for relief as an Innocent Spouse.
Even if the IRS releases a levy, you still owe the debt until it’s paid off some other way, or is no longer collectible by law (the IRS usually has ten years from the assessment date to collect the tax).
If the tax debt is the result of a joint tax return, both spouses are responsible for the entire liability even if you're no longer married.
If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), different rules apply. You may be levied to collect taxes owed by your spouse up to one-half of your income or the value of your property. Check the laws in your state.
Note: The IRS can't levy to collect tax you owe because you failed to have minimum healthcare coverage under the Affordable Care Act.
What You Need to Know: Federal Payment Levy Program
Publication 594, The IRS Collection Process
Browse common tax issues and situations at Get Help.
If your IRS problem is causing you financial hardship, you've tried repeatedly and aren't receiving a response from the IRS, or you feel your taxpayer rights aren't being respected, consider contacting the Taxpayer Advocate Service (TAS).
You may be eligible for representation from an attorney, certified public accountant (CPA), or enrolled agent (EA) associated with a Low Income Taxpayer Clinic (LITC). LITCs also provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language.