Overview
This article explains the practical and legal differences between a levy and a garnishment, how each starts, what property or income is vulnerable, and the immediate steps you can take if you receive notice. In my 15+ years helping taxpayers, I’ve seen confusion about these terms cause missed deadlines and worsened outcomes — so clarity matters.
Key legal distinctions
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Authority and initiation
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Levy: For federal tax debts the IRS uses an administrative levy under Internal Revenue Code § 6331 to seize assets or to require a third party to surrender funds (for example, a bank or payroll provider). A levy does not usually require a separate court order. The IRS must first send a Notice and Demand for Payment and a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (often called LT11 or CP504) before proceeding. (Source: IRS guidance on levies.)
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Garnishment: Most wage garnishments used by private creditors or state agencies are issued under state court orders or statutory processes and are commonly called garnishments or wage attachments. For private debts, a creditor usually sues and gets a judgment, then asks the court to garnish wages or bank accounts. State rules determine the percentage that can be withheld and which income is protected.
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Who can use them
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Levy: The IRS and many state tax agencies can levy without a court judgment once they satisfy statutory notice requirements. Other federal agencies may also have levy or administrative offset powers for non-tax debts.
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Garnishment: Private creditors, child support agencies, and some state agencies must generally use court or statutory processes. Federal tax collection actions sometimes use the term “garnishment,” but the IRS’s parallel tool is the administrative levy on wages.
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Notice and appeal rights
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Levy: The IRS must provide a final notice (often called a Notice of Intent to Levy) and a 30-day window to request a Collection Due Process (CDP) hearing or to seek other administrative remedies (IRC § 6330). If you timely request a hearing, the IRS generally cannot levy while the appeal is pending. (Source: IRS — Collection Due Process.)
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Garnishment: State procedures vary. Often a creditor must obtain a judgment and the debtor receives notice of the garnishment proceedings and may have statutory timeframes to object.
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Typical targets
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Levy: Bank accounts, wages (via a levy on wages), federal payments, business assets, and personal property. Some assets are protected or partially exempt from levy under IRC § 6334.
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Garnishment: Wages, bank accounts, or specific income streams subject to a court order. Exemptions and withholding limits vary by state and by the type of debt (e.g., child support garnishments often have higher priority than other creditors).
Practical examples (real-world scenarios)
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IRS bank levy: The IRS sends a Final Notice (LT11 / CP504). If you don’t act, the IRS can issue a bank levy to your financial institution which may freeze and then withdraw funds in your account to satisfy the tax debt. Banks typically freeze the account for a short statutory period (often 21 days) to allow the taxpayer to act or to protect an innocent spouse claim.
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Wage garnishment for a private debt: A credit card company obtains a judgment in state court. Your employer receives a garnishment order and is required to withhold a portion of your net wages according to state law and send that to the creditor until the judgment is satisfied.
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IRS wage levy vs. private garnishment: Both reduce your paycheck, but the IRS must follow federal notice rules and allows administrative appeals (CDP). A private creditor needs a judgment and follows state garnishment rules; you usually have defenses in state court.
What income and assets are exempt or partially protected?
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Under federal tax law certain property is exempt from levy. The Internal Revenue Code (IRC) and IRS guidance list common exemptions (IRC § 6334), including: basic clothing, certain household furniture, tools of a trade, and some federal benefit payments and portions of wages. Social Security and federal benefit protections are nuanced — while Social Security benefits are generally protected from levy, other offsets or collections rules (for nontax federal debts) can differ. Always check the IRS exemption lists and consult an advisor for your facts. (Source: IRS — Understanding Levies.)
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State garnishment exemptions vary. Many states protect a floor of disposable earnings from garnishment (similar to the federal Consumer Credit Protection Act for private creditors), and some states exempt specific benefits from collection.
Steps to take immediately if you receive a notice
- Read notices carefully. For IRS levies, watch for the Final Notice of Intent to Levy (the LT11/CP504 style notices). Note the date and the 30-day appeal window.
- Don’t ignore the notice. Ignoring usually makes the situation worse.
- Contact the IRS or the issuing authority using the contact information on the notice — not a phone number from an unfamiliar email or letter you didn’t verify.
- If the IRS issued a levy notice, request a Collection Due Process hearing (CDP) within 30 days to stop a levy while the appeal is pending. You can also request other enforcement alternatives like an installment agreement, an Offer in Compromise, or a temporary hardship (currently not collectible) status. (Source: IRS — Collection Due Process.)
- If a private creditor is garnishing wages, check the court paperwork for deadlines to object and consider contacting an attorney or your state legal aid office.
- If funds are levied from your bank account, ask your bank for the freeze/release timeline and whether a portion of the funds are exempt. The IRS has procedures to release an administrative levy for financial hardship — you can request that release.
Documents and evidence to prepare
- Notice(s) you received (copies of LT11, CP504, judgment, garnishment order).
- Proof of income and basic living expenses (rent/mortgage, utilities, medical bills, dependents).
- Bank statements showing the levy or freeze.
- Proof of protected income (Social Security award letter, retirement checks).
In my practice, building a complete packet before calling the IRS or attending a hearing saves time and improves outcomes.
Common misconceptions and mistakes
- Misconception: “All levies require a court order.” Wrong — the IRS’s administrative levy generally does not require a court order once proper notice has been given.
- Mistake: Ignoring the 30-day deadline for a CDP hearing. Missing that window limits your appeal options.
- Misconception: “My whole paycheck can be taken.” Federal and state laws limit how much of your wages can be garnished.
Options to stop or limit collection
- Pay the debt in full — fastest way to stop a levy or garnishment.
- Enter an installment agreement with the IRS — will typically stop or prevent an IRS levy once set up and adhered to.
- Offer in Compromise — settle for less than the full balance if you meet strict eligibility criteria.
- Request Currently Not Collectible status — if you can show that collection would create economic hardship.
- Appeal or object — use CDP for IRS levies or the available state court objections for garnishments.
For IRS-specific actions and where to send requests, see the IRS collection pages about levies and your rights: https://www.irs.gov/ (search “levy” and “Collection Due Process”).
When to get professional help
Contact a tax resolution professional, licensed CPA, or attorney if:
- You have large balances and notices from the IRS.
- Funds have already been levied from a bank or wages garnished.
- You suspect identity theft or a mistaken levy/garnishment.
I frequently recommend taxpayers get a qualified representative to file appeals and negotiate installment agreements or offers in compromise — these actions require careful documentation and experience with IRS procedures.
Useful resources and internal reading
- For help understanding IRS levy notices see our guide: CP166: Understanding Your Notice of Intent to Levy.
- If you need immediate steps to protect bank accounts, our article How to Stop a Federal Tax Levy: Emergency Steps to Protect Accounts walks through emergency actions.
- For wage-specific questions and rules see: Wage Garnishments: How the IRS Collects from Your Paycheck.
Authoritative references: IRS pages on levies and Collection Due Process (irs.gov), and the Taxpayer Advocate Service guidance on taxpayer rights. For non-tax garnishments see state court rules and the Consumer Financial Protection Bureau (consumerfinance.gov) for general consumer protections.
Quick checklist for taxpayers facing enforced collection
- Keep the notice(s) and note deadlines.
- Gather proof of income and essential expenses.
- Contact the issuing agency promptly; request appeals or hardship relief where available.
- Consider professional representation if substantial funds, complex exemptions, or identity issues are present.
Professional disclaimer
This article is educational and does not constitute legal or tax advice. Rules and procedures vary by jurisdiction and change over time. Consult a qualified tax professional, CPA, or attorney for advice tailored to your situation.
Final takeaway
A levy and a garnishment can both take money you need, but they stem from different legal processes and carry different rights and remedies. Recognizing which process applies — and acting promptly within stated deadlines — is the most important step to protecting income, preserving bank balances, and negotiating a manageable resolution.
