Under United States Federal law, a tax levy is an administrative action by the Internal Revenue Service (IRS) to collect unpaid tax liabilities. Essentially, the IRS seizes a debtor’s property without court intervention. According to Section 6331 of the Internal Revenue Code, the IRS uses this enforcement method, which is considered very severe, only when the debt is substantial and the taxpayer has ignored previous notices. The IRS has the authority to levy wages, bank accounts, insurance proceeds, real estate (including land and houses), and other assets, depending on the amount owed.
Constitutional rules mandate that the IRS cannot seize property without providing due process. They are required to send a 30-day notice before a levy takes effect. This notice is delivered either in person or by mail. This 30-day period allows taxpayers time to explore alternatives and settle the debt. This notification process is known as the Collection Due Process.
Taxpayers can respond to the IRS notice by requesting a hearing to seek relief. These hearings are granted only once per taxpayer per financial year.
It is crucial that the hearing is conducted by a neutral and impartial IRS officer. An inexperienced officer may not be able to provide adequate assistance. During the hearing, taxpayers can request various forms of relief, such as spousal relief, installment agreements, or Offers in Compromise. If taxpayers disagree with the officer’s decision, they can appeal to the Tax Court or a Federal District Court.
The IRS can also require employers to garnish the wages of tax debtors, sending the specified amount directly to the IRS. However, Section 6334 exempts certain benefits from tax levies, allowing debtors to cover essential living expenses. Once wage garnishment begins, it continues until the debt is fully paid. Federal law prohibits employers from firing employees whose wages are garnished. Employers who violate this law face fines or up to one year of imprisonment.
Taxpayers can seek assistance from professional counselors to understand the IRS levy notice and explore alternative solutions. Counselors can save taxpayers research time and help them find effective ways to address the issue. Taxpayers can also research levy procedures and regulations online through the IRS website. IRS publications and other resources, including books on federal tax regulations, can provide detailed information on levy procedures and taxpayer rights.