By Jon Call, EA — Enrolled Agent & NTPI Fellow • CLAW Tax Group
An IRS levy is a legal seizure of your assets or income to satisfy a tax debt. Unlike a lien — which is a legal claim against your property — a levy is the actual taking of it. The IRS can levy your bank account, your wages, your Social Security benefits, and in some cases your physical property.
A levy does not happen without warning. By the time the IRS levies, they have already sent multiple notices and provided you with an opportunity to respond. Most people who get levied either ignored those notices or did not know what to do with them. Either way, the situation is recoverable — but it requires immediate action.
Lien vs. Levy: The Difference
These terms are often confused.
A federal tax lien is a legal claim the IRS files against your property to protect the government’s interest in your assets. It attaches to everything you own — real estate, financial accounts, vehicles. It is a public record and damages your credit. It does not immediately take anything from you.
A levy is the enforcement action that actually seizes your property or income. The lien gives the IRS the legal right. The levy is the IRS exercising it.
You can have a lien without a levy. A levy typically follows a lien, but not always.
Types of IRS Levies
Bank Account Levy
The IRS sends a levy notice to your bank, which immediately freezes funds in your account up to the amount owed. The bank holds those funds for 21 days before turning them over to the IRS. That 21-day window is your opportunity to act. If you can get the levy released before the 21 days expire, your bank returns the funds. Once the 21 days pass and the funds are remitted, they are gone.
A bank levy is a one-time seizure. It captures what is in your account on the day the levy is served. Deposits made the next day are not affected — unless the IRS issues another levy.
Wage Levy (Garnishment)
A wage levy is continuous. Once issued to your employer, it directs them to withhold a portion of each paycheck and send it to the IRS until the debt is paid in full or the levy is released. The IRS uses an exemption table based on your filing status and number of dependents to calculate how much of your wages are exempt. In many cases the exempt amount is minimal and the garnishment is severe.
Unlike a bank levy, a wage levy does not expire after 21 days. It continues until resolved.
Social Security Levy
The IRS can levy up to 15% of your Social Security benefits through the Federal Payment Levy Program (FPLP). This is automatic and does not require a separate notice to Social Security. For retirees living primarily on Social Security, this can create immediate hardship.
Property Seizure
In more serious cases — typically involving significant assets, business property, or repeat non-compliance — the IRS can seize and sell physical property. Vehicles, real estate, and business equipment are all fair game. Property seizures require additional IRS authorization and are less common than bank or wage levies, but they happen.
How the Levy Process Works
The IRS cannot levy without following a specific process. Understanding it matters because there are intervention points at each stage.
- Assessment — The IRS assesses the liability and sends a bill (CP14 or similar notice).
- Demand for payment — If unpaid, the IRS sends a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058 or LT11). This is the critical notice. It triggers a 30-day window.
- Collection Due Process (CDP) hearing — Within 30 days of the Final Notice, you can request a CDP hearing with the IRS Office of Appeals. Filing this request stops levy action while the hearing is pending.
- Levy — If no CDP request is filed and no payment arrangement is made, the IRS proceeds with levy action.
If you have received a Final Notice of Intent to Levy, the clock is running. Thirty days goes fast.
How to Stop a Levy
The right approach depends on your financial situation, the amount owed, your CSED dates, and what you can realistically sustain.
Pay in full — The levy releases immediately upon payment.
Installment Agreement — An approved installment agreement will release a levy in most cases. The IRS will not continue to levy a taxpayer who is current on a payment plan.
Offer in Compromise — A pending OIC suspends levy action. If accepted, the remaining liability is discharged. Learn more about Offers in Compromise →
Currently Not Collectible (CNC) status — If you cannot afford basic living expenses, the IRS can place your account in CNC status, which suspends collection including levies.
CDP Hearing — If you are still within 30 days of the Final Notice, requesting a CDP hearing stops the levy. This is often the first step while we evaluate which resolution path makes sense.
Hardship release — In cases of demonstrated economic hardship, the IRS can release a levy even without a formal resolution in place. This does not eliminate the debt, but it stops the immediate bleeding.
The 21-Day Window on Bank Levies
If your bank account has been levied, you have 21 days before the funds are turned over to the IRS. This is the window to act.
In that time, your options are to get the levy released by entering into an agreement, demonstrating hardship, or requesting a CDP hearing if one is still available. If the levy was issued in error, that is also addressable in the 21-day window.
Do not wait. Day one is the day you find out. Every day you spend figuring out what to do is a day closer to losing those funds permanently.
What We Do
When a client comes to us with a levy, the first call is to the IRS to understand the full picture: what years are assessed, what balances are outstanding, what notices were sent and when, and whether CDP rights are still available. We pull transcripts the same day.
From there, we move toward a levy release through whichever mechanism fits the situation, and then work toward a permanent resolution. A levy release is a temporary measure. The underlying debt still needs to be addressed.
Every case at CLAW Tax Group is reviewed by our senior practitioners. We do not take cases we do not believe we can resolve.
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CLAW Tax Group is a tax resolution firm based in White Bear Lake, Minnesota, serving clients in all 50 states. Affiliated with Wildes At Law.