As per the Internal Revenue Service (IRS) website, “[a] levy is a legal seizure of your property to satisfy a tax debt.” See Internal Revenue Service, Levy. A levy is more drastic than a lien; a lien is merely placed on a debtor’s assets as security in the collection of the underlying tax debt. A levy, on the other hand, is the actual seizure of the debtor’s assets for the purposes of satisfying an underlying tax debt.
An IRS levy is a fairly drastic measure, and as a result it is only performed after certain requirements are met, including:
- Assessment of a tax
- Remittance of Notice and Demand for Payment
- Debtor fails to pay the underlying tax debt
- Remittance of Final Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice)
- 30 days have passed since the mailing of the levy notice
The IRS can levy on a wide range of a debtor’s assets, including any personal or real property owned by the debtor, assets of the debtor held by another (e.g. wages, dividends, accounts receivable, cash loan value of life insurance, etc.), and state tax refunds. Id.
Upon receipt of a levy notice, a debtor may appeal the impending levy action by requesting that an IRS manager review the case, or by requesting a Collection Due Process hearing with the IRS Office of Appeals by filing a request for Collection Due Process hearing with a local IRS office within 30 days of receiving the levy notice. See Internal Revenue Service, Collection Appeal Rights. A number of issues can be raised through these processes; debtors can claim that all outstanding taxes have been paid, protection of the bankruptcy court, procedural errors have been made in the IRS’ tax assessment, the IRS tax collection is not timely, procedural arguments, or spousal defenses.
If the IRS levies on your bank account, the bank must hold the money for 21 days allowing for time for the issues giving rise to the levy to be resolved, at which point the bank must remit the funds plus interest to the IRS. If the IRS levies on other assets, such as wages and state tax refunds, such levies will end only when the IRS voluntarily releases the levy, when the underlying tax debt has been paid, or when the time for tax collection has expired. Id.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.