A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the 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,
- They could seize and sell property that you hold (such as your car, boat, or house), or
- They 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).
The IRS usually levy only after these three requirements are met:
- They assessed the tax and sent you a Notice and Demand for Payment;
- You neglected or refused to pay the tax; and
- They 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. Please note: 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.
You may ask an IRS manager to review your case, or you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a Collection Due Process hearing with the IRS office listed on your notice. You must file your request within 30 days of the date on your notice. Some of the issues you may discuss include:
- You paid all you owed before they sent the levy notice,
- The IRS assessed the tax and sent the levy notice when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
- IRS made a procedural error in an assessment,
- The time to collect the tax (called the statute of limitations) expired before they 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.
At the conclusion of your 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. Refer to Publication 1660, Collection Appeal Rights (PDF), for more information. 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.
Levying your wages, federal payments, state refunds, or your bank account.
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.
If the IRS levy your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows time to resolve any issues about account ownership. After 21 days, the bank must send the money plus interest, if it applies, to the IRS.
Filing a claim for reimbursement when the IRS made a mistake in levying your bank account
If you paid bank charges because of a mistake the IRS made when they levied your account, you may be entitled to a reimbursement. You will have 30 days to appeal the determination to the Tax Court. Use Form 8546, Claim for Reimbursement of Bank Charges Incurred Due to Erroneous Service Levy or Misplaced Payment Check.