Tax Levy – Understanding and Resolving IRS and State Tax Levies

Do you have or know someone with a tax levy? A tax levy is serious, it is the actual seizure of a taxpayer’s property by either the IRS or a State Tax Agency. It is one of the final steps in the enforced collection process and is usually exercised only after all previous attempts to collect a tax debt have failed.

A tax levy is different from a tax lien. The lien simply gives the issuing tax agency priority over other creditors with respect to the identified property while the levy actually results in the confiscation of the property.

The IRS must officially warn a taxpayer before assets are seized to satisfy an existing tax debt. The first official notice to go out is the Notice of Tax Due and Demand for Payment. If the delinquent taxpayer fails to respond to this notice, it will be followed by the Final Notice of Intent to Levy together with an official notice informing the taxpayer of their right to a hearing. Once this official communication process has been completed, the IRS can seize the identified assets without further notification.

With certain exceptions, the IRS can levy any physical asset held by a taxpayer. They can also levy retirement accounts, bank accounts, dividends, wages, insurance policies and numerous other assets that may be the property of the taxpayer but held by someone else. One notable exception to the list of assets that are subject to the levy process is the taxpayer’s principal residence. The taxpayer’s residence can never be seized to satisfy a tax debt of $5000 or less and can only be confiscated to cover a debt in excess of $5000 with written approval of the federal district court judge or magistrate. In addition, property (other than rental property) that is used as a residence by another person cannot be seized to satisfy a tax liability of less than $5000. Similarly, real or tangible property used in a taxpayer’s trade or business cannot be levied without written approval of an IRS director. Other categories of physical property exempt from an IRS levy include wearing apparel, school books and furniture and personal effects up to a fixed dollar amount. Certain types of payments are also exempt. This list includes workers’ compensation, unemployment benefits, some annuity and pension payments, certain types of Social Security, disability and welfare payments, judgments in support of minor children and certain amounts of wages and other income.

The IRS is a very powerful collection agency and an IRS Levy is one of its most aggressive actions. A taxpayer who receives and IRS Notice of Tax Due and Demand for Payment or an IRS Notice of Intent to Levy should realize that enforced collection action is imminent. At this point, the most effective response is probably to enlist the help of a qualified tax resolution specialist. An individual who understands tax law and has experience working with the IRS may be able to stop impending collection activity. There is also the chance that a tax professional will be able to reduce the tax liability that resulted in the collection action or eliminate it altogether.

If you are the target of a tax levy or any other type of aggressive collection activity by the IRS or State Tax Agency, our experienced tax professionals can help you forestall the action and resolve the tax debt issue that caused it. For more information about our tax debt resolution services, visit us today at Contact us by phone at (949)-596-4143 or by email at to receive a free, no obligation consultation.