Levy/Seizure of Assets

You have a balance on your account and the IRS has issued a levy or has conducted a seizure to satisfy your tax debt.  The term “levy” and “seizure” can be used interchangeably; however, the term “levy” is typically used when the IRS attaches to funds, while the term “seizure” is typically used when the IRS attaches to physical property.

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 to capture additional funds at a later date. Where the IRS takes an asset all at once. For example, 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 to reach funds placed 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. Federal law allows the IRS to issue a continuous levy on salary and wages and certain federal payments.  Levies against your wages or social security income are generally continuous. 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, the levy will have a continuous effect. 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. 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). For specifics, see Levies on the TAS website.

When a levy attaches to your salary, generally the levy only attaches to a portion of your paycheck, until the levy is released, or your balance is full paid. By law, a portion of your wages is exempt from levy based on your filing status, additional standard deduction, and dependents. There are some exceptions to this exemption, including when other income provides enough funds to meet the exempt levy amount.  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, to complete and return within three days. If you do not return the statement in three days, your exempt amount is figured as if you are married filing separately with no dependents. Your employer will use the information provided on the Form 668-W, as well as Publication 1494 to determine the amount that is exempt.  The exempt amount will be paid to you by your employer and the remaining amount will be sent to the IRS and applied to your tax balance.

The IRS can 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, or up to 100 percent of payments due to a vendor for goods or services sold or leased to the federal government. See What You Need to Know: The Federal Payment Levy Program for more information.

IRS may levy your state tax refunds, as well as payments owed by clients for services you or your business have provided or will provide.

The IRS may seize your real or personal property.  The IRS will determine the minimum amount it will accept for the sale, also known as the “minimum bid”.  You will be provided with a copy of the minimum bid and fair market value amounts, as well as a notice of sale.  IRS will advertise the sale to the public through various means, such as newspaper, flyer, or internet.  After giving public notice, the IRS will generally wait at least 10 days before selling your property. If there are funds left over from the sale after paying the costs associated with the seizure (including any liens or judgments that have a senior position to the IRS) and your tax debt, the IRS will tell you how to get a refund of the remaining funds.

You have a balance on your tax account. A notice was sent to you previously letting you know how much you owe, when it was due, and how to pay. Since the IRS did not hear from you, it is continuing with its collection process by issuing a levy or conducting a seizure.

After verifying the notice is from the IRS, call the number on the Notice of Levy or 1-800-829-1040. If it’s from the IRS, the notice of levy will have instructions on how to respond to the levy and who to contact. If the notice is not from the IRS, visit I Got a Notice From the IRS for further details. Be prepared to discuss alternative ways to pay your taxes, which may include providing financial information for the IRS to review.

In certain situations, there can be relief from levy and/or seizure.  See Levy Relief for more information on the situations in which relief is available.  Please note that the term “levy” also means seizure when pertaining to levy relief.

If the funds or property are not yet in IRS possession, you can request an appeal through the Collection Appeal Program.  In addition, if you are still within the timeframe allowed, you can request a Collection Due Process Hearing or Equivalent Hearing.  See Publication 1660 for a full explanation of your appeal rights.

Appeals is separate from and independent of the IRS Collection office that initiated the collection action. You can also ask that the IRS manager review your case informally. You can obtain the manager’s name and phone number by contacting the employee listed on your notice. IRS employees are required to give you their manager’s name and phone number. For specifics, see Levies on the TAS website and Levy Relief on the TAS Roadmap. See Publication 594, The IRS Collection Process, and Publication 1660 for a full explanation of how to appeal a collection action.

After your real estate is seized and sold, you or anyone with interest in the property, may redeem the real estate within 180 days after the sale.

To redeem your property after sale, you must pay the successful bidder the purchase price plus interest at the rate of 20% per year, compounded daily.  For more information on the process of redeeming your property, click here.

You need to figure out what payment options might work for your situation, and act to set up a payment plan or other way to pay off your balance and request a levy release. Being proactive in addressing the tax debt may prevent additional penalty and interest charges and eliminate the need for the IRS to take further action to collect the balance. For specifics, see Levies on the TAS website and Revocation or Denial of Passport in Case of Certain Unpaid Taxes for further information.

If the levy is creating an economic hardship on you, meaning you’re unable to meet basic, reasonable living expenses, then contact the IRS at the number on the levy or notice immediately.

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.

If you believe you have an acceptable reason for interest or a penalty to be removed or reduced, you may complete Form 843, Claim for Refund and Request for Abatement or send a signed statement to the IRS explaining your reasons. For specific instructions, see Notice 746, Information About Your Notice, Penalty, and Interest.