Know Your IRS Tax Levy Rights

What is a Levy?

Frequently referenced in conjunction with liens, levies involve actually taking property to satisfy taxes where liens are simply a claim against property used as security for taxes.

The Internal Revenue Service (IRS) can use levies to seize and sell any type of real or personal property. This includes cars, boats, houses, wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of life insurance, commissions, etc. The most commonly seen levies are bank and wage levies.

Taxpayers who ignore or refuse to pay a Notice and Demand for Payment from the IRS will receive what is referred to as a "Final Notice of Intent to Levy and Notice of Your Right to A Hearing" (a.k.a. "Intent to Levy" notice) at least 30 days before the levy.

Upon receiving such a notice, it is essential that taxpayers request a review of the case from an IRS manager. Alternately, a Collection Due Process hearing with the Office of Appeals can be requested. This must be filed within 30 days of the date on the notice. Levies can be released by placing a phone call to the IRS. However, this is not recommended unless someone is knowledgeable of the applicable tax laws.

Bank levies attach for one day only. Releases on levies typically occur when a taxpayer address the tax issue through Currently Not Collectible status, an Offer In Compromise or an Installment Agreement.

Your Tax Levy Rights

According to the Internal Revenue Service (IRS), all taxpayers have rights with regard to tax levies:

1. If an agreement is made between the IRS and the taxpayer that a tax liability is not collectible, then the IRS is required to release an IRS wage levy.
2. The IRS may not place a lien on the taxpayer's residence in situations when the amount of the IRS tax levy is less than $5,000.
3. Once the collection statute of limitation expires the IRS is required to stop all collection efforts and cancel the IRS tax levy.
4. 30 days before issuing a tax levy the IRS is required to send a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice).
5. Taxpayers have a right to a hearing and must be notified of this at least 30 days before the levy is filed.
6. A taxpayer may request to have an appeals officer hear the case, but may not challenge the actual tax unless there was no previous opportunity to do so.
7. Taxpayers have 30 days to appeal unsatisfactory outcomes to the U.S. Tax Court or Federal Court.

The IRS does not typically release levies on a bank accounts once issued. That said, a competent  tax professional may be able to get a partial release if the monies in the account are needed for medical expenses, housing expenses, transportation expenses, and payroll.

Finally, the law states that the bank is to remove the money from the attached account on the day it is issued. However, it does not send that money to the IRS for 21 days, which gives the taxpayer time to contact a tax professional.

by: Victoria J. Burns