IRS Levy

IRS Wage levy

An IRS levy is a legal seizure of your property to satisfy a tax debt. IRS levies are different from IRS liens. An IRS tax lien is a claim used as security for the IRS tax debt, while an IRS wage levy actually takes the property to satisfy the IRS 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,

1. IRS could seize and sell property that you hold (such as your car, boat, or house), or
2. IRS 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).

IRS usually levies only after these three requirements are met:

1. IRS assessed the tax and sent you a Notice and Demand for Payment;
2. You neglected or refused to pay the tax; and
3. IRS 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 IRS levy. 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. 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:

1. You paid all you owed before we sent the levy notice,
2. IRS assessed the tax and sent the levy notice when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
3. IRS made a procedural error in an assessment,
4. The time to collect the tax (called the statute of limitations) expired before we sent the IRS levy notice,
5. You did not have an opportunity to dispute the assessed liability,
6. You wish to discuss the collection options, or
7. You wish to make a spousal defense.

If IRS levies your wages, salary, or federal payments, the levy will end when:

1. The IRS levy is released,
2. You pay your tax debt, or
3. The time expires for legally collecting the tax.

If IRS levies your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This period allows you time to solve any problems from the levy or to make other arrangements to pay. After 21 days, the bank must send the money plus interest, if it applies, to the IRS. To discuss your case, call the IRS employee whose name is shown on the Notice of Levy.

IRS Wage Levy release

IRS must release your levy if any of the following occur:

1. You pay the tax, penalty, and interest you owe.
2. IRS discovers that the time for collection (the statute of limitations) ended before the levy was served.
3. You provide documentation proving that releasing the levy will help IRS collect the tax.
4. You have an installment agreement, or enter into one, unless the agreement says the levy does not have to be released.
5. IRS determines that the levy is creating a significant economic hardship for you.
6. The expense of selling the property would be greater than the fair market value of the property.

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Releasing your property

Before the sale date, IRS may release the property if:

1. You pay the amount of the government's interest in the property,
2. You enter into an escrow arrangement,
3. You furnish an acceptable bond,
4. You make an acceptable agreement for paying the tax, or
5. The expense of selling your property would be greater than the fair market value of the property.

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Returning levied property

IRS can consider returning levied property if:

1. IRS levies before it sends you the two required notices, or before your time for responding to them has passed (10 days for the Notice and Demand; 30 days for the Notice of Intent to Levy and the Notice of Right to a Hearing).
2. IRS did not follow IRS' own procedures.
3. IRS agreed to let you pay in installments, but still levied, and the agreement does not say that the IRS can do so.
4. Returning the property will help you pay your taxes.
5. Returning the property is in yours and the government's best interest.

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Selling Your Property

IRS will post a public notice of a pending sale, usually in local newspapers or flyers. IRS will deliver the original notice of sale to you, or send it to you by certified mail.

After placing the notice, IRS must wait at least ten days before conducting the sale, unless the property is perishable, and must be sold immediately.

Before the sale, IRS will compute a minimum bid price. This bid is usually 80% or more of the forced sale value of the property, after subtracting any liens.

If you disagree with this price, you can appeal it; and ask that the price be computed again by either an IRS or private appraiser.

You may also ask that IRS sell the seized property within 60 days. For information about how to do so, call the IRS employee who made the seizure. IRS will grant your request, unless it is in the government's best interest to keep the property. IRS will send you a letter telling you of its decision about your request. After the sale, IRS first uses the proceeds to pay the expenses of the levy and sale. Then any remaining amount to pay the tax bill.

If the proceeds of the sale are less than the total of the tax bill and the expenses of levy and sale, you will still have to pay the unpaid tax.

If the proceeds of the sale are more than the total of the tax bill and the expenses of the levy and sale, IRS will notify you about the surplus money and will tell you how to ask for a refund. However, if someone, such as a mortgagee or other lienholder, makes a claim that is superior to yours, IRS will pay that claim before it refund any money to you.

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If you need help dealing with an IRS Tax Problem call 888-829-5293 for a FREE Tax Consultation!