Help With Tax Levy: IRS and State Tax Levy Relief

If you’re being threatened with a levy by the IRS or your state tax agency for unpaid taxes, you need to immediately explore your legal options. Federal and state tax authorities have the legal right to seize property after giving you the proper notice – these agencies can take your bank accounts, investment accounts, wages, and even your personal property or real estate.

Whether your wages are being garnished, your bank account has been frozen, or you’ve just received a levy notice, we’re here to help. At the Law Offices of Stephen B. Kass, P.C., we can help explain the tax laws and regulations behind tax levies, respond to levy notices, take steps to stop a levy, negotiate with tax agencies, and protect your assets. Call us at 212-843-0050 to learn more.

Key Takeaways

• A levy involves a tax agency seizing your property to cover past-due tax debt.
• Assets that may be levied include wages, bank accounts, real estate, vehicles, and tax refunds.
• The IRS must follow a specific protocol before levying your assets unless they believe their ability to collect is in imminent danger.
• If so, the IRS can initiate a jeopardy levy, which allows them to levy assets without much advance warning.
• You may seek relief from levies with an appeal, other payment arrangements, or a levy release.

How Our Team Helps With Tax Levies

At the Law Offices of Stephen B. Kass, we work with clients facing IRS tax levies, New York State tax levies, and Florida levies. We’ve successfully helped clients:

• Stop wage garnishments.
• Halt bank levies.
• Negotiate installment agreements and other payment options.
• Appeal levy actions.
• Request CDP appeal hearings.
• Resolve tax debt via other means to avoid levies.
• Work through aggressive collection actions by the IRS, the New York Department of Taxation and Finance, and the Florida Department of Revenue.

We understand that taxpayers facing federal tax issues are likely also to be struggling with state tax compliance. By tackling your state and federal tax issues simultaneously, we’re better able to help you find relief and get set up for future compliance.

What Is a Tax Levy?

A tax levy involves the government taking your money, assets, or income to cover your unpaid taxes. Government agencies have to follow strict protocols to enforce levies, but the process can move quickly when they provide proper notice.

Tax agencies can seize your income, bank accounts, investment accounts, Social Security benefits (with certain limitations), personal property, and tax refunds to collect the taxes they’re owed. The sooner you take action after receiving a levy notice, the more options you have for avoiding the levy.

Tax Levy vs. Tax Lien—Understanding the Differences

A tax lien is a legal claim the government has to your property. They have a claim to your property when you fail to pay your tax debt, and after they go through the proper procedures to file a tax lien. Once a lien is filed, you can’t refinance, sell, or borrow against your property without first paying off the tax debt.

A levy goes one step further. With a levy, the government has the right to your assets after following the necessary procedures. They then use that right to take your assets and either put the money seized toward the tax debt or sell the property and use the proceeds toward your tax debt.

You can think of a tax lien as a warning (to you and prospective creditors) that the government is ready, willing, and able to seize your property. A levy follows when you ignore the warning.

When Can the IRS Impose a Levy?

By the time the IRS actually imposes a levy, it should be no secret to you that you’re in trouble with the IRS. Before imposing a levy, the IRS must assess the tax debt, send a bill requesting payment, and send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058, CP90, or LT 11). After they send the final notice, they must wait 30 days before going ahead with the levy.

Notices Leading Up to a Levy

While the IRS legally only has to send the bill and final notice, they typically send several other notices before moving ahead with a levy. Levying assets is costly and time-consuming, and the IRS would generally rather get taxpayers to pay voluntarily. The notices you’ll likely receive before a levy include:

• CP14: Notifies you of your balance due and requests that you pay your balance.
• CP501: Serves as a reminder of what you owe.
• CP503: A slightly more urgent reminder of your balance due.
• CP504: A formal final notice of your balance due and a warning that the IRS will seize your state tax refund.
• LT11, CP90, or Letter 1058: A final notice before the levy.

Per the IRS, these notices are typically sent about eight weeks after the previous one has gone unanswered. This means that you’ve likely had months of correspondence from the IRS before you receive your final notice before the levy.

Can the IRS Levy Without Notice?

In the vast majority of cases, the IRS can’t issue a levy without notice, although there are exceptions. They can use a jeopardy levy to seize assets without prior notice if they believe their ability to collect is at immediate risk. The IRS may go this route if an individual is rapidly liquidating assets, transferring funds or assets to others, or planning on fleeing the country to avoid tax collection.

Types of Levies

The various types of levies can affect almost everything of value that you own. They include:

• Wage garnishment: Wage garnishment levies allow the IRS to take a significant amount of your paychecks until your tax debt is paid in full. The IRS doesn’t have the same limitations that other creditors have. Rather than being limited to a small percentage of your income, they allow you to keep a small amount based on your family size and filing status and can take everything else.
• Bank account levy: Your bank account may be frozen, and the funds within it transferred to the IRS to cover your tax debt.
• Social Security levy: The Federal Payment Levy Program allows the IRS to seize a percentage of certain Social Security benefits each month. If the agency uses a manual levy, they may be able to seize an even bigger portion of your benefits.
• Retirement account levy: This type of levy isn’t as common as others, but the IRS does reserve the right to target certain retirement accounts.
• Asset seizure: Vehicles, business equipment, intellectual property, and even real estate can be seized and sold to pay off tax debt. Most people think of their home when they face this type of levy, but note that the IRS rarely targets a taxpayer’s place of residence.
• Refund offsets: Your state and federal tax refunds can be intercepted and put toward tax debt.

Exempt Assets

While it may seem that the IRS has the freedom to take whatever it wants, many assets are exempt from tax seizure. They include:

• A certain percentage of your wages based on your family size and filing status.
• Some Social Security benefits.
• Unemployment benefits.
• Basic allowable living expenses and items.
• Equity in your primary residence.

Once the IRS has already seized assets, it’s much harder to get them back than it is to stop a levy from happening in the first place.

Fighting a Federal Tax Levy

Stopping a tax levy is possible, but you have a limited amount of time. When you know a levy is imminent or a levy has already been imposed, you must take immediate action to protect your rights. Here’s an overview of the main options.

Filing an Appeal

You can request a Collection Due Process (CDP) hearing within 30 days of receiving your final notice (Letter 1058 or LT11). This pauses the levy while your appeal is received. During your CDP hearing, you can attempt to negotiate other payment arrangements. This will stop the levy before it starts.

Requesting an Equivalent Hearing

If you miss the deadline for a CDP hearing, you can request an equivalent hearing for up to a year. You can make this request while the levy is already in progress. Unfortunately, the levy won’t stop while the hearing is underway, but you can use this opportunity to explain why the levy should stop and make alternative arrangements.

Making Alternative Payment Arrangements

Entering an installment agreement can help you avoid a levy, and in some cases, setting up payments can even stop a levy. But the terms of the payment arrangement must stipulate that the agency will stop the levy.

If you can’t afford any payments toward your tax debt due to financial hardship, consider applying for currently not collectible (CNC) status with the IRS. This is only a temporary pause on collection, but it can give you time to get into a better financial position.

An offer in compromise (OIC) is an option available to eligible taxpayers with limited disposable income and assets. With an OIC, the IRS resolves a tax debt for less than the full amount. While few taxpayers qualify for this option, it can bring significant relief to those who do, and if you qualify, the IRS will stop the levy.

Other Reasons for Releasing a Tax Levy

The IRS may also release a levy if it causes undue hardship or if it was issued in error.

What You Need to Know About State Levies

At the Law Offices of Stephen B. Kass, we also help taxpayers with New York and Florida tax levies. Our firm can also assist with tax levies in some other states—just reach out to us to learn more.

New York Levies

The Department of Taxation and Finance (DTF) uses levies to collect unpaid income tax, sales tax, and other state taxes. Like the IRS, they can garnish wages, freeze bank accounts, and seize your assets. Income execution orders allow the DTF to collect your tax debt directly from your wages.

If you’re in danger of having your assets levied by the Department of Taxation and Finance, it’s important to work with an attorney with New York-specific experience.

Florida Levies

Although Florida doesn’t have a state income tax, the Department of Revenue uses levies to collect unpaid sales tax, corporate income tax, unemployment tax, and other business tax liabilities. Our team is prepared to help you avoid aggressive enforcement actions in Florida.

When dealing with state tax levies, you need a tax pro who’s experienced in that state. Don’t work with the big firms that lack state-specific experience. Instead, find a seasoned pro who can really help you understand the options.

Get Help With Your Tax Levy Situation Now

If you’re facing an imminent levy or your assets have already been levied, the most important thing you can do is act quickly. The longer you wait, the harder it is to unwind a levy and protect your assets from tax agencies.

There are many ways we can protect your assets, but until we look at your tax situation and finances, we can’t help you move forward. Our firm offers guidance to clients throughout the nation, with state tax guidance in New York and Florida. Call us at 212-843-0050 or reach out online to discuss your tax situation now.

Sources:

https://www.irs.gov/pub/irs-npl/2024ntf-best-practices-for-responding-to-irs-collection-notices.pdf

https://www.irs.gov/individuals/understanding-your-cp14-notice

https://www.irs.gov/taxtopics/tc201

https://www.irs.gov/pub/irs-pdf/p594.pdf

https://www.irs.gov/businesses/small-businesses-self-employed/levy

https://www.irs.gov/businesses/small-businesses-self-employed/how-do-i-get-a-levy-released

https://www.irs.gov/businesses/small-businesses-self-employed/information-about-wage-levies

https://www.taxpayeradvocate.irs.gov/get-help/interacting-with-the-irs/levies/

https://www.tax.ny.gov/enforcement/collections/levies.htm

https://www.tax.ny.gov/enforcement/collections/tax-warrants.htm

https://www.tax.ny.gov/enforcement/collections/income-executions.htm