A levy is a legal seizure of your property to satisfy a tax debt. A lien is different than a levy as a lien as used as security for a debt, while a levy actually takes the property to satisfy the tax debt.
If you do not pay your taxes (or make arrangements to settle your tax debt) the IRS may seize and sell any type of real or personal property that you own or have interest in.
The IRS can seize and sell your property that you hold (such as car, boat or house) or
The IRS can levy property that is yours but is held by a third party (such as wages, retirement accounts, bank accounts, dividends, licenses, rental income, accounts receivable, the cash loan value of your life insurance or commissions).
The purpose of an IRS Levy is usually to get your attention after other notices or contacts have been ignored.
Typically, the IRS will levy either your wages, or other income, and your bank accounts, although they can levy any type of property you own or have interest in.
3 things typically happen before the IRS will levy:
1. The IRS assesses the tax and sends you a Notice and Demand for Payment
2. You neglect or refuse to pay the tax and
3. You were sent a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before the levy. They may give you this notice in person, leave it at your home or usual place of business or send it to the last known address they have on filed for you by certified mail, return receipt requested.
If the IRS levies your bank account, this is a onetime levy and the bank must hold the funds you have on deposit, up to the amount you owe for 21 days. After 21 days, if not released the bank must send the funds plus any interest to the IRS.
A levy on your wages, salary or federal payments is a continuous levy that will end when:
The levy is released (usually when arrangements are made for the tax debt or there is a hardship
You pay your tax debt or
The time expires for legally collecting the tax.
Our recommendation for quickly stopping an IRS Levy:
Hire a licensed tax professional with knowledge and experience in the IRS Collection Dept.