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Summary of a Tax Levy
A tax levy occurs when the Internal Revenue Service (IRS) seizes someone's property because of a failure to pay taxes. A levy is different from a lien, which is a claim against future property or earnings. A levy is the legal seizure of property currently in your possession. The IRS will place a tax levy on your assets after three requirements are met: 1) The IRS assessed the amount of tax due and sent you a Notice and Demand for Payment; 2) You ignored the notice or refused to pay the required amount of tax; and 3)The IRS sent you a Final Notice of Intent to Levy at least 30 days before the levy was implemented. A levy notice can be hand-delivered to your home or business or sent via registered mail.
Your Rights if a Levy is Placed on Your Assets
If you receive a levy notice from the IRS, you have the right to request a hearing within 30 days of receiving the notice. This hearing is called a Collection Due Process hearing, and it gives you a chance to argue your case in front of IRS collections officials. There are a number of arguments you can use in a Collection Due Process hearing, including the fact that you paid all taxes owed prior to receiving the levy notice; you are currently in bankruptcy, which prevents the IRS from
seizing your assets; the levy notice was sent to you in error; and the statute of limitations on tax collection expired prior to you receiving the levy notice. Once the hearing is complete, the IRS will issue a judgment. You have 30 days to contest the judgment in court by filing a lawsuit against the IRS. If the judgment is rendered against you, the IRS can proceed with the asset seizure even though you are contesting the decision.
Levies Against Wages
In addition to seizing physical assets such as a house or a car, the IRS can also implement a levy against your wages. In such a case, your bank is required to hold any funds deposited in your account for up to 21 days. If the wage levy is still in place after this period, the bank is required to send the funds, plus interest, to the IRS. The funds will be credited against the tax liability you owe. The IRS will remove a levy against your wages when you pay your tax debt in full, successfully appeal the levy through the Collection Due Process hearing or the statute of limitations for collecting the tax expires. If the IRS places a levy against your wages, it is best to discuss a payment plan with a collections official that will allow you to satisfy your tax debt over time while keeping a portion of your wages to pay other bills and expenses.