When the IRS Sends a Levy: What It Means and How to Stop It

Quick overview

An IRS levy is a powerful collection tool that lets the government legally take funds or property to satisfy unpaid federal taxes. Because a levy can immediately reduce cash flow—through bank account seizures or wage garnishments—early, informed action is essential to protect household or business finances. This guide explains the notice timeline, what the IRS may seize, specific steps to stop or reverse a levy, and practical tips for working with the IRS or a tax pro.

How a levy differs from a lien

• Tax lien: a legal claim the government files to secure its interest in your property. It can hurt credit and block sales but doesn’t seize assets. See our deeper overview of liens and levies for differences and remedies.
• Levy: the actual legal seizure or collection of assets to satisfy tax debt.

For more on how the IRS handles liens and levies, see the FinHelp article “How IRS Collections Prioritize Liens, Levies, and Seizures”.

The notice timeline — what the IRS must do first

Before the IRS can levy, it generally must: 1) assess the tax and send a Notice and Demand for Payment (a bill), and 2) send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (commonly called the “Notice of Intent to Levy”). You usually have 30 days from that final notice to request a Collection Due Process (CDP) hearing.

This 30-day protection is important — if you timely request a CDP hearing, the IRS generally will not proceed with collection during the appeal. IRS guidance on notices, levies, and your rights is available on the agency website (IRS: “Understanding a Levy” and Publication 594).

Sources: IRS — Understanding a Levy (https://www.irs.gov/payments/understanding-a-levy); IRS Publication 594: The IRS Collection Process (https://www.irs.gov/publications/p594).

What the IRS can seize

The IRS has broad authority to levy many types of property, including:

• Bank and brokerage accounts (frozen and then remitted to the IRS)
• Wages and other income (through a continuous levy sent to an employer)
• Business assets, receivables, and accounts
• State tax refunds (offsets) and certain federal payments in limited circumstances
• Personal property, vehicles, real estate (ultimately through seizure and sale)

There are exemptions: the IRS must leave enough income for basic living expenses in wage garnishments and may not be able to immediately seize certain federal benefits. If a levy would create an economic hardship, you can request a release. See IRS guidance on levies and exempt income for specifics.

Immediate steps if you get a Notice of Intent to Levy

1. Read the notice. It explains the tax type, tax periods, and your rights, including the 30-day deadline to request a CDP hearing. Do not ignore it.
2. Call the IRS or the contact listed on the notice to confirm amounts and options. Keep written notes (date, time, name and badge number).
3. Request Collection Due Process (CDP) or Equivalent Hearing within the 30-day window if you want to appeal collection actions.
4. If funds have already been seized, ask for a levy release for hardship (see below) and confirm the bank or payer’s timeline for remittance.
5. Consider professional help — a CPA, EA, or tax attorney can file for you and negotiate on technical points.

Ways to stop or release a levy

• Pay the balance in full: the quickest way to end a levy is to pay the debt immediately. Once paid, the IRS will release the levy.
• Enter an installment agreement: the IRS typically releases levies when a taxpayer enters a legitimate installment agreement and makes the first payment. There are different plans (streamlined, long-term) depending on debt size and ability to pay. For details, see FinHelp’s guide on using the IRS Fresh Start Installment Agreement.
• Offer in Compromise (OIC): if you cannot pay the full amount and meet strict eligibility, an OIC may let you settle for less than owed. Preparing a strong financial package is essential; FinHelp’s OIC resources explain documentation and evaluation.
• Request Currently Not Collectible (CNC) status: if paying would create severe hardship, the IRS may temporarily suspend collection. CNC does not remove the liability but halts levies while circumstances remain.
• Timely request a Collection Due Process hearing: filing Form 12153 (Request for a Collection Due Process or Equivalent Hearing) within the 30-day window can stop levy actions while the appeal is pending.
• Prove economic hardship: if a levy would prevent you from meeting reasonable living expenses, you can request an immediate release. The IRS reviews living expenses against national and local standards.

Sources: IRS — Understanding a Levy; IRS Publication 594.

If the IRS already levied a bank account or paycheck

• Bank levies: a bank often places a hold on the seized account and may be required to freeze funds for a short statutory period before remitting them. If the funds are exempt (certain government benefits, retirement distributions under rules), you can provide documentation and ask the IRS to release the levy and refund seized amounts.
• Wage levies: the employer receives a Notice of Levy and must start withholding taxable wages. The notice explains what amounts are exempt. You can request a release by negotiating an agreement, proving hardship, or applying for CNC status.

If your funds were wrongfully seized, contact the IRS immediately, gather proof of exempt income, and consider filing for a hearing or refund claim.

Practical negotiation tips and documentation checklist

• Documentation to have ready: latest tax returns, current wage and bank statements, household budget, monthly bills, proof of dependents, medical bills, and records of any other extraordinary expenses.
• If applying for an installment agreement, be ready to provide income and expense details and to set up automatic payments if required.
• When pursuing an Offer in Compromise, prepare a complete financial package (balance sheet, asset valuations). See FinHelp: “Preparing a Strong Financial Package for an Offer in Compromise.”
• Use Form 2848 (Power of Attorney) if you hire a representative, so they can speak and negotiate with the IRS on your behalf.

Internal resources: FinHelp’s pages on Offers in Compromise and installment agreements provide step-by-step filing tips and sample documentation:

• What Is an Offer in Compromise and How It Works: https://finhelp.io/glossary/what-is-an-offer-in-compromise-and-how-it-works/
• How to Use the IRS Fresh Start Installment Agreement to Avoid a Lien: https://finhelp.io/glossary/how-to-use-the-irs-fresh-start-installment-agreement-to-avoid-a-lien/

Common mistakes to avoid

• Ignoring notices: failure to act removes procedural protections and increases the chance of a levy.
• Falling for speed-up scams: only work with trusted professionals; the IRS will not demand payment by gift cards or threaten immediate arrest.
• Panic-selling assets: liquidation may be unnecessary if you can negotiate an agreement.
• Missing the 30-day deadline to request a CDP hearing — missing it limits appeal options.

When to get professional help

If the levy will wipe out operating funds, payroll, or your household safety net, or if complex issues (business taxes, trust accounts, bankruptcy interactions) are involved, seek qualified help. In my practice, timely engagement with an enrolled agent or tax attorney preserved businesses and restored essential accounts, often by arranging installment agreements or successful OIC submissions.

Typical timelines and what to expect

• After the Final Notice: 30 days to request a CDP hearing.
• If a bank levy is issued: banks may hold funds briefly and then remit; exact hold/remit schedules can vary.
• After entering an installment agreement: release of a levy can occur once the IRS processes the agreement and you make required payments—this can take several business days to a few weeks.

FAQs

• Can the IRS levy my entire paycheck? The IRS calculates exempt amounts so you keep a basic amount for living expenses; it will not generally take the entire paycheck unless there’s no exemption and the income is large.
• How long does a levy last? A levy remains until the liability is paid, a collection alternative is approved, the time for collection expires, or the IRS releases it for hardship or other reasons.
• Do state tax agencies work with the IRS? States can have separate procedures; the IRS may also request offsets of state refunds to collect federal obligations.

Final checklist — immediate actions

1. Read the levy notice and note deadlines. 2. Call the IRS listed contact and ask about CDP rights. 3. Gather financial documents to show hardship or to propose a payment plan. 4. Consider timely filing for a CDP hearing (Form 12153) or applying for an installment agreement or OIC. 5. If money already seized, ask for an immediate levy release for hardship and document exempt funds.

Professional disclaimer

This article is educational and not legal, tax, or financial advice. Individual circumstances vary; consult a qualified tax professional (CPA, enrolled agent, or tax attorney) before making decisions. Author references IRS guidance (IRS: “Understanding a Levy” and Publication 594) and FinHelp resources for deeper steps.

Authoritative sources:

• IRS: Understanding a Levy — https://www.irs.gov/payments/understanding-a-levy
• IRS Publication 594: The IRS Collection Process — https://www.irs.gov/publications/p594
• Consumer Financial Protection Bureau — general guidance on debt collection practices and protections (https://www.consumerfinance.gov)

If you want, I can prepare a short sample letter to request a levy release for economic hardship or a checklist of documents to submit with an Offer in Compromise.