Tax Levy and IRS Levy

Threat of Levy and Levy Releases

A tax levy or garnishment or attachment are all the same thing. The terms may be used interchangeably.

An IRS levy is commenced as a last resort. Communications between the taxpayer and the Service have broken down and the IRS does not know what the taxpayer intends to do about unpaid taxes.

A tax levy is a demand made by the Service on a third party; an employer, a bank, a brokerage house or anyone else they can locate that has possession of assets owned by the delinquent taxpayer.

Far and away the most common tax levies or garnishments are on salary and wages, and bank accounts.

There are differences in the nature of the tax levies on these asset classes.

Wage levies are continual. Once in place the employer is obliged to continue to withhold wages until the levy is satisfied or the levy is released.

Currently the IRS may withhold all wages due above $4.06 per hour for a single individual with no dependents. That is far below the minimum wage. The taxpayer is liable for income tax on the full amount paid and withheld.

999999As with a bank levy, the employer is obliged to hold the funds until 21 days from the date of levy have gone by, not counting the day the levy was received and implemented.

In the case of a bank levy on a time deposit, the bank must deduct the 10% penalty for early withdrawal if it applies and remit the balance to the IRS.

It is very difficult to retrieve funds impounded by the employer or financial institution. It can be done, but in most cases that will require the intervention of the Taxpayer Advocate Office, a subject found elsewhere in this web site.

The issue will be satisfied when all taxes, penalties and interest are paid if full, or when the IRS withdraws the levy order.

Orders for levies may be withdrawn when the Service is satisfied the taxpayer is attempting to comply with his/her IRS obligations.

Compliance with that tax obligation may be by paying, entering into an installment agreement, submitting an Offer in Compromise or being placed in non-collectible status (because the taxpayer does not have enough money to pay the back taxes ). 

Consequently, any correspondence received from the IRS or any agency that mentions a levy or seizure of assets should be given immediate urgent attention.

For an immediate consultation regarding your tax situation, call us at the toll free number just above.  We are on the West Coast and our hours of operation are from 8:30 a.m. to 5 p.m. We also arrange consultations outside those hours if needed.

WE SUGGEST YOU DO NOT REPRESENT YOURSELF.
THE I.R.S. IS YOUR ADVERSARY IN THESE MATTERS.