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What to do if you get an IRS Levy Letter

tax levy letter

How to Keep the IRS From Taking Your Assets

In most cases, correspondence from the IRS is enough to give taxpayers that sick feeling in the pits of their stomachs. The sensation gets worse if the notice contains a dreadful four-letter word, like l-e-v-y. Most people are not exactly sure what an IRS levy letter means, but they know that it can’t possibly be a good thing.  Read on to find out what to do if you get an IRS levy letter.

Sometimes, people get a levy notice for taxes they don’t owe, if the delinquent taxpayer is one of their employees. You have certain rights and responsibilities in these matters as well; however, you have many more “responsibilities” than “rights.”

Some IRS Levy Letter Basics

In most states, debt collectors may only reach into your pocket in limited circumstances. But the IRS is no ordinary debt collector. According to the Internal Revenue Manual, the Service has broad authority to collect past due taxes, up to and including the seizure of nonexempt property. Almost nothing is off limits. The Service can seize:

  • Current Wages: Per the following table, some wages are exempt, depending on the taxpayer’s filing status and number of exemptions. The IRS can take the rest.
  • Government Benefits: Most benefits, including Social Security payments, are subject to seizure after the taxpayer gets an IRS levy letter. Certain other benefits, most notably unemployment benefits, workers’ compensation payments, and some government pension payments, are exempt under federal law.
  • Personal Property: 26 U.S. Code § 6334 also sets the exemption levels for wearing apparel, professional tools, and household furnishings. The IRS can seize a residence if the taxpayer owes more than $5,000 and the house has value under the tax seizure rules.

An IRS levy letter also authorizes the Service to seize nonexempt funds in bank accounts. By law, the IRS must wait thirty days to execute the levy.

How Do I Stop an IRS Levy?

In some ways, an IRS levy letter is an attention-getting device as opposed to a collections device, because the IRS only sends these notices to people who have ignored everything else, at least in most cases. The Service assumes that the taxpayer will contest the levy, probably by making one of the following arrangements:

  • Offer in Compromise: If the taxpayer is unable to pay the entire amount due, and not just unwilling to pay the entire amount, the IRS will accept less. Typically, the IRS only stops collection activities, including levies, after it accepts the OIC, so be sure and partner with a tax attorney who can protect your interests.
  • Installment Agreement: Almost everyone qualifies for an installment agreement, and in some cases, the IRS will even forgive some of the penalties.
  • Innocent Spouse: In a nutshell, if the claimant can establish that s/he did not know about the income understatement or deduction overstatement and had no reason to know about it, the IRS may waive the tax due. Some innocent spouse cases are easier to prove than other ones.
  • CNC: If the taxpayer cannot live above the poverty line and pay the IRS at the same time, the Service may designate the account as Currently Not Collectible and suspend collections efforts, at least for the time being.

If there is an error in the IRS levy letter, a direct appeal might be an option as well. The best idea is always to speak with an experienced tax attorney about all your options, and then select the best course of action together.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.