Understanding IRS levy

Last updated on July 16, 2021

IRS levy are not pretty words. It is one of the most aggressive collection actions of the IRS. Taxpayers who are under tax debt and ignore or refuse to pay their back taxes may face IRS levy. Under it, the IRS seizes and may sell any property or right to property of a taxpayer.

No court permission is needed for the IRS to place a levy. The IRS may seize a taxpayer’s property such as house, car, boat or any other property. They may also place a levy on property that belongs to the taxpayer, but is held by someone else such as retirement accounts, bank accounts, wages, dividends, rental income, commissions or cash loan value of life insurance.

The IRS can only place levy if certain conditions are fulfilled. Before placing a levy, the IRS needs to send the taxpayer concerned the Notice and Demand for Payment and the final notice of levy, Final Notice of Intent to Levy and Notice of Your Right to a Hearing. If the IRS levies state tax refund, they may send a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing.

If bank levy is placed on a taxpayer’s account(s), bank must hold funds on deposit for 21 days to resolve any ownership disputes regarding the account(s). After the period of 21 days, the IRS can withdraw any amount of funds from the bank account(s) of the taxpayer to fulfil the tax debt.

Releasing an IRS levy is difficult. The conditions for its release include:

• Taxpayer pays off the entire amount of tax debt
• The time expires for legally collecting back taxes
• Taxpayer begins to pay tax debt after an agreement with the IRS

Taxpayers must make efforts to avoid IRS levy by choosing a tax debt payment program of the IRS to pay their tax debt. It is in the best interests of taxpayers to resolve their tax debt issue before it hurts their finances.