When you owe the IRS, one of the most severe actions the agency can take to secure payment is through a tax levy. A levy occurs when the IRS legally takes ownership of your assets to satisfy your tax debt.
How a Tax Levy Works
If your tax bill remains unpaid after receiving a Notice and Demand for Payment, the IRS can move forward with a levy. You’ll know this is happening when you receive a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least 30 days before the levy takes effect.
The type of levy used depends on your circumstances. A bank levy allows the IRS to have your bank place a hold on funds in your account, then withdraw the money 21 days later to cover your debt. The IRS may continue to collect funds until the balance is fully paid.
Another common form is a property levy, where the IRS seizes your property, sells it, and applies the proceeds toward your outstanding balance. Homes and vehicles are among the most frequently seized assets.
However, the IRS’s authority isn’t limited to bank accounts or property. The agency can also seize retirement funds, life insurance proceeds, and even your passport to enforce payment.
Removing a Tax Levy
Having your assets seized is stressful, but it’s not a permanent situation.
The fastest way to remove a levy is by paying your IRS balance in full, once payment is received, the levy is typically lifted within 30 days. For many people, however, that isn’t financially possible.
A better approach is to work with a qualified tax professional who can evaluate your situation and guide you through options such as setting up a payment plan, filing an appeal, or claiming financial hardship. A levy doesn’t have to derail your finances, with the right help, you can get it released and move forward.
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