IRS Tax Levy

Yes, the IRS can garnish your wages with a tax levy. This means they legally require your employer to send the vast majority of your net paycheck directly to them instead of giving it to you. A wage garnishment is ongoing until you pay off the tax debt or set up another arrangement to resolve it. It’s serious, but there are ways to stop it, and Pink Harbor, CPA can help you take action quickly!

You can get an IRS levy released by resolving your tax debt through payment, setting up a payment plan, proving financial hardship, or giving the IRS documents they have been requesting. Some ways to stop a wage garnishment are to negotiate an installment agreement, submit an Offer in Compromise, or demonstrate that the levy is causing severe financial difficulty. If you are still within your timeline to file an appeal, you can also temporarily halt the garnishment by appealing through a Collection Due Process (CDP). This will stay all levies while your case is reviewed.

The IRS keeps a tax levy in place until you fully pay the debt, the levy is released, or the collection statute of limitations expires, which usually happens 10 years after the tax assessment date (IRC §6502(a)(1)). If you file for bankruptcy or request an Offer in Compromise, these actions may create “tolling events” which suspend the statute. You can find more details about levy durations in IRS Publication 594, The IRS Collection Process. If the levy causes financial hardship, the Taxpayer Advocate Service (TAS) can help you seek relief.

A federal tax lien claims your property as security for unpaid taxes, as authorized by IRC §6321, while a tax levy allows the IRS to seize your assets to satisfy the debt (IRC §6331). For example, the Supreme Court in United States v. National Bank of Commerce, 472 U.S. 713 (1985) upheld the IRS’s ability to levy bank accounts. IRS Publication 1468 provides a comprehensive explanation of liens and levies.

The IRS cannot levy your property without providing proper notice. The law requires the IRS to send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058 or LT11) and give you 30 days to respond (IRC §6331(d)). Exceptions, such as jeopardy levies, happen under rare circumstances outlined in IRC §6330(f). If the IRS skips the notice process, you can contact the Taxpayer Advocate Service, file a petition in U.S. Tax Court, or request a CDP hearing.

Possibly not. The IRS does not garnish your wages if you make regular payments under an approved installment agreement or submit an Offer in Compromise, as described in IRM 5.11.1.3.1 and IRS Publication 594. However, if you are simply making payments in the absence of a formal agreement, the IRS can levy. If you default on an agreement, the IRS may also be able to levy. The Taxpayer Advocate Service can help you resolve disputes if the IRS takes action while you comply with a payment plan.

Absolutely. The IRS does levy bank accounts under (IRC §6332(c)). There is a mandatory 21-day waiting period which the bank must hold the funds before turning the funds over to the IRS. This waiting period gives you time to resolve the debt or request a levy release due to hardship. IRS Publication 1660, Collection Appeal Rights, explains your rights to challenge or appeal a levy.

The IRS can seize your home, but it happens rarely and is typically the last-ditch effort after all other collection efforts. The IRS must obtain court approval before seizing your primary residence under IRC §6334(e). IRS Publication 1, Your Rights as a Taxpayer, outlines your rights to challenge this action. If the IRS threatens to seize your home, you can seek assistance from the Taxpayer Advocate Service.

The IRS does levy Social Security benefits, taking up to 15% through the Federal Payment Levy Program (FPLP) under IRC §6331(h). If you can prove the levy causes financial hardship, the IRS may grant a hardship exemption. IRS Publication 594 explains how to request relief, and the Taxpayer Advocate Service can help you secure an exemption if needed.

The IRS levies wages, bank accounts, Social Security benefits, retirement accounts, vehicles, real estate, and personal property under IRC §6331(b). However, some assets, like certain unemployment benefits and workers’ compensation, are exempt under IRC §6334. IRS Publication 1494 explains exempt income limits and how to calculate them.