Tax Levy vs. Tax Lien
A lien is a legal claim against your property that secures payment of your tax debt. A levy goes a step further and actually takes the property.
Here’s how the IRS compares levies and liens:
| Tax lien | Tax levy | |
|---|---|---|
| What it does | Claims your property as security for the debt | Takes your property to pay the debt |
| Wider effects | A Notice of Federal Tax Lien may affect your ability to get credit or sell property | A levy isn’t a public record |
When the IRS Can Issue a Tax Levy
A levy is usually the last step in a longer process. If you’re not sure where your balance came from, start with why you owe. The IRS usually levies only after these steps happen:
- The IRS assesses the tax and sends you a Notice and Demand for Payment.
- You neglect or refuse to pay.
- The IRS sends a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before the levy.
Before that, you may get a CP504 notice, a final reminder that the IRS may levy your wages, bank accounts or state tax refund. It’s separate from the 30-day final notice that comes with hearing rights.
What the IRS Can Take With a Levy
The IRS can garnish wages, which means taking part of your paycheck directly. It can also take bank funds, vehicles, real estate and other personal property.
Wages
Part of each paycheck goes to the IRS until the debt is paid, you make other arrangements or the levy is released. Some of your pay may be exempt based on your filing status, standard deduction and dependents, according to IRS wage levy rules.
Bank Accounts
Your bank holds your available funds for 21 days before sending the money to the IRS, giving you time to resolve disputes. A bank levy normally doesn’t affect money you deposit after it takes effect.
Federal Payments and Retirement Accounts
The IRS can generally take up to 15% of certain federal payments, including Social Security benefits. Retirement accounts can also be levied, according to IRS Publication 594.
How to Stop or Release a Tax Levy
Publication 594 lists ways to stop a levy, depending on your stage in the process.
The IRS can’t issue a new levy while your payment plan request or offer is pending or in effect.
| Your situation | What you can do |
|---|---|
| You got the final notice with hearing rights | Request a Collection Due Process hearing with Form 12153 within 30 days |
| You can pay over time | Request one of the IRS payment plans, also called an installment agreement |
| You can’t pay in full | Submit an offer in compromise |
| You need outside help | Contact the Taxpayer Advocate Service, a free and independent office within the IRS |
If a levy is already in place, contact the IRS right away to request a release. A release can follow full payment, economic hardship or an installment agreement. Even after a release, you still owe the remaining balance.
