Wage Garnishment/Bank Levy
If the taxpayer does not pay a tax liability in full and fails to find an alternative method to pay the tax, the IRS may levy against the taxpayer’s property § 6330, § 6331. A levy is a legal seizure of the taxpayer’s property to satisfy a tax debt. Levies are different from liens in that a lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.
Releasing the Taxpayer’s Property
IRS has certain limitations in regards to bank and wage levies. With wage levies, a proper legal advocate can get the garnishment taken off. Otherwise, the IRS levy will end when:
- The levy is released;
- The taxpayer pays the taxpayer’s tax debt; or
- The statute of limitations expires for legally collecting the tax.
If the IRS levies the taxpayer’s bank account, the taxpayer’s bank must hold funds the taxpayer has on deposit for 21 days (up to the amount the taxpayer owes). This period allows the taxpayer time to solve any problems from the levy or to make other arrangements to pay. After 21 days, the bank must remit to the IRS the money, plus interest if it applies. To discuss the taxpayer’s case, call the IRS employee whose name is shown on the Notice of Levy.
Federal Payment Levy Program
Under the Federal Payment Levy Program, the IRS may levy monies from the following federal payments that the taxpayer may receive: retirement from the Office of Personnel Management, social security benefits, federal vendor payments, federal employee salaries, or federal employee travel advances and reimbursements. This program electronically levies the taxpayer’s federal payments paid through the Department of Treasury, Financial Management Service (FMS). If the IRS electronically levies the taxpayer’s federal payments, the levy will take 15% from each of the payments until the account is resolved. If the taxpayer already is working with an IRS employee, call that employee for assistance. If the taxpayer is not working with an employee, call 1-800-829- 7650 for assistance.
Releasing a Levy/Lift
The IRS must release the taxpayer’s levy if any of the following occur:
- The taxpayer provides documentation proving that releasing the levy will help the IRS collect the tax;
- The taxpayer has an installment agreement, or enters into one, unless the agreement says the levy does not have to be released;
- The IRS determines that the levy is creating a significant economic hardship for the taxpayer.