Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
What is a tax levy?
A tax levy is the seizure of property to pay taxes owed. Tax levies can include penalties such as garnishing wages or seizing assets and bank accounts. Some items can’t be seized. Tax levies typically show up after the government has placed a tax lien.
A tax lien, on the other hand, is a claim the government makes on your property, including real estate and other assets, when you’re past due on your income taxes, and a levy is the exercise of that claim.
When will the IRS issue a tax levy?
Typically, these four things occur before the IRS issues a tax levy:
The agency calculates the outstanding tax and sends the taxpayer a "Notice and Demand for Payment."
The taxpayer fails or refuses to pay the outstanding tax.
The agency then sends the taxpayer two additional documents — a "Final Notice of Intent to Levy" and a "Notice of Your Right to a Hearing" — at least 30 days before the levy is issued. These documents are either transmitted in person or sent to the taxpayer's home, last-known address or place of business. If the agency levied a state refund, these notices might be sent after the levy is issued.
The IRS sends the taxpayer advance notice that it may begin contacting third parties (i.e., employers, banks, friends, neighbors) to collect information about the taxpayer's tax liability.
News alert: On February 9, 2022, the IRS announced that it would be suspending certain automated notices and letters — including unfiled tax return notices, balance due notices, and intent to levy notices — while it worked through a backlog of unprocessed returns. The suspension is meant to prevent confusion for those taxpayers who may have resolved or taken steps to resolve tax issues but are still receiving notices due to their returns being unprocessed. As of the date of this article, there has been no formal announcement about when the notices will resume, but the agency does warn taxpayers who currently have outstanding prior-year filing requirements or outstanding taxes due to resolve the matters quickly because interest and penalties will continue accruing.
How a tax levy can affect you
Here are a few things that could happen if you’re hit with an IRS levy.
Your paycheck may shrink. Wage garnishment is a common tactic. It means your employer must fork over a portion of your earnings every payday.
Your bank accounts could be frozen. Bank accounts are prime targets for recouping back taxes. Typically, the IRS contacts your bank and places a 21-day hold on your account. If you haven’t worked things out with the IRS after that time, the bank may send some or all of your money to the IRS.
Your house could be in jeopardy. “They generally don’t want to go for your house because it’s bad publicity,” says David Klasing, a CPA and tax attorney in Irvine, California. “That’s a last resort, but I have seen it happen.” Some items can’t be seized. For example, the IRS says it can’t seize unemployment benefits, certain annuity and pension benefits, certain disability payments, workers’ compensation, some public assistance payments or child support payments. Undelivered mail, some items necessary for school or work, and certain furniture and household items are generally off the table, too.
» Make sure your withholdings are correct: People often get behind on their taxes because they don’t have enough withheld from their paychecks during the year. (Learn how to manage your withholdings via your W-4 here.)
Promotion: NerdWallet users get 25% off federal and state filing costs.
Promotion: NerdWallet users can save up to $15 on TurboTax.
How to get rid of a tax lien or tax levy
Pay your tax bill. Sounds obvious, but in most cases paying your back taxes is the only way to stop a tax lien or tax levy. “The most important thing I can tell you is, cooperate with the collection action. If they ask for something, you give it to them. If they reach out to you, reach back. Communicate with them,” Klasing says.
Get on an IRS payment plan. Your tax balance will still accrue interest and penalties until it’s paid off, but if you allow the IRS to take at least three consecutive payments right out of your bank account (called a direct debit installment agreement), you might convince the IRS to withdraw the lien from public record. (You’ll still have to pay your tax debt, of course.) You aren’t required to hire someone to get you on a payment plan — you can apply on the IRS website. Fees run from $0 to $225 depending on the plan and your income
Ask for an offer in compromise. An OIC, or offer in compromise, is a request to settle your back taxes for less than the full amount you owe. Beware: The IRS typically accepts fewer than half of the applications it gets in a year. To even be considered, you need to have filed all of your tax returns, plus make required estimated tax payments for the current year. You also won’t be considered if you’re in bankruptcy or are being audited.
File an appeal. You can ask for a collection due process hearing from the IRS Office of Appeals if you want a review of a lien or levy notice. Also, if you disagree with an IRS employee’s decision about a lien or levy, you can ask for a conference with the employee’s manager. If you disagree with the manager, you can ask the Office of Appeals to review your case.
File for bankruptcy. It’s not a pretty option, but in some cases it can get rid of tax debt. However, it’s often a long process, there are lots of rules and it doesn’t always work, Klasing warns.
Find the tax relief company that's best for you
We've weighed the pros and cons of some major players in the space.