Tax Levies Tips

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What is a state tax levy?

State Tax Levy

The IRS is involved with many states in a program titled ‘State Income Tax Levy Program' (SITLP). Not all states are involved in this program. The purpose of this program is to allow the IRS to levy your state income tax refund to satisfy any delinquent federal tax bills. The program matches the state income tax refund database with the federal unpaid tax liability (delinquent taxes) database. The state will send you a notice of the levy when all the following happens:

  • It is determined that you are receiving a state tax refund,
    you live in a state involved in the SITLP Program
  • You have a delinquent federal tax account
  • Notice of Levy on Your State Tax Refund. You will receive this form from your state.
  • Notice of Your Right to Hearing after the levy.
After you receive the state's levy notice, you will receive information from the IRS. You will be issued an IRS notice offering you the opportunity to appeal the levy. However, if you previously received an IRS levy notice mentioning your right to a hearing, you will not get a second notice.If you have any questions or concerns about the state refund tax levy program, you can call either 1-800-829-7650 or 1-800-829-3903 for help.

How can I release a tax levy?

Releasing a Levy

You can have your IRS tax levy removed (released) from your property whenever any of the following situations apply:

  • You paid the levy and all applicable costs in full.
  • You have shown the IRS that the levy is causing undue financial hardship on you.
  • You have shown the IRS that they have a better chance of collecting the taxes if they release the asset.
  • The statute of limitations ended before you received the levy notice.
  • You are involved in an installment agreement (unless it states otherwise)
You have shown the IRS that the liabilities on the levied property are less than the fair market value. And, releasing the levy would not hinder collecting the taxes

What is the difference between a tax lien and levy?

Tax Lien vs. Tax Levy

You may read about IRS tax liens and IRS tax levies, but not understand what the difference is. Both a tax lien and a tax levy are considered part of the enforced collection process. These methods of collecting your unpaid tax bill are used after you have not voluntarily paid, or agreed to pay, your back taxes.

Tax lien. A tax lien is the first step in the IRS enforced collection process. The purpose of the tax lien is to stake a claim against any of your assets. By filing the Notice of Tax Lien in your county's public records system, anyone interested has notice that the state or federal government has a claim against your assets. The filing gives the taxing authority priority over other creditors, in most cases.

In short, a tax lien is a claim against your property. You need to pay off the tax lien in order to gain control of your assets.

Tax levy. A tax levy, on the other hand, is a continuation of the enforced collection process. When your unpaid tax bill has reached the point of being unsatisfied, the taxing authority will slap a tax levy against your assets. This means they can seize any and all of your assets to pay off your unpaid tax bill. Also, you may not receive an advanced notice.

What is a wage levy?

Wage Levy

If you are a wage-earner (are an employee of someone) you may be affected by a wage levy. Another term for wage levy is wage garnishment.

This is the second most popular way for the IRS to levy your assets. They simply target your wages.

If you are self-employed and receive income from l099 various sources, the IRS can also levy notices to those businesses or individuals.

What assets can be levied?

Assets That Might Be Levied

Once you have not voluntarily paid, or agreed upon paying, your back taxes, the IRS starts their enforced collection process. The point where the IRS seizes your assets is known as the IRS tax levy stage. Some of your assets that the IRS may take from you include:

  • Bank accounts
  • Personal property such as accounts receivable from your business, computers, furniture
  • Wages
  • Income from customers
  • Vehicles (boats, motorcycles, cars, etc.)
  • Social Security benefits
  • Retirement plans
  • Real property (real estate you own)
  • Stocks, bonds, investment items (such as dividends)
  • State and federal income tax refunds, current and future
Accounts that belong to you, but are held by someone else. For example, cash loan value of your life insurance, licenses, rental income, mutual fund accounts.

An IRS levy arrives shortly after the Notice of Lien. You may receive a written notice, or not. An IRS levy can happen even though no a tax lien has not been filed.

An IRS levy occurs only when you have not attempted to contact the IRS or repay your unpaid tax bill. They do not happen totally out of the blue.

How do I appeal an IRS levy?

Appealing An IRS Levy

If you dispute the tax levy, you do have rights during the IRS collection process. You will need to fill out and send the IRS Form 12153, Request for A Collection Due Process Hearing.

Requesting a collection due process hearing must be done within 30 days after receiving notice of a tax levy being served against your property. You will be filing your appeal with the Office of Appeals. Here is a sampling of some of the issues you may discuss at the Collection Due Process Hearing:

  • Your tax bill was paid in full prior to you receiving the IRS levy notice.
  • The IRS made a procedural error regarding your assessment.
  • You would like to discuss the collection options you have
  • The tax and levy notice were both assessed while you were in bankruptcy. (You are protected by the automatic stay while you are in bankruptcy).
  • The statute of limitations has expired. This means you received your IRS levy notice after the time allowed had expired.
  • You want to make a defense based on your marital status.
  • You did not have enough time (nor the opportunity) to dispute the assessed liability.
You need to mail the form requesting a collection due process hearing to the IRS address that is printed on your levy notice.

What is a Notice of Levy?

Notice Of Levy

The last step in the IRS enforced collection process involves a levy. If you have ignored all attempts by the IRS to either negotiate repayment or paid your unpaid tax bill in full, the IRS will slap you with a Notice of Levy.

This notice allows the IRS to legally take all or any of your personal and real property in order to satisfy your unpaid tax bill. In addition to currently owned property, the levy notice will apply to any future interest you may receive in property.

Any property you have that was previously subjected to a tax lien, will not have a tax levy. (One piece of property cannot have two liens placed on it). This entire process could have been negated if only you would have contacted the IRS willingly.

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