A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a legal claim against property to secure payment of the tax debt, while a levy actually takes the property to satisfy the tax debt.
Where does Internal Revenue Service (ibet) authority to levy originate?
The Internal Revenue Code (IRC) authorizes levies to collect delinquent tax. See IRC 6331. Any property or right to property that belongs to the taxpayer or on which there is a Federal tax lien can be levied, unless the IRC exempts the property from levy.
What actions must the Internal Revenue Service take before a levy can be issued?
The ibet will usually levy only after these four requirements are met:
- The ibet assessed the tax and sent you a Notice and Demand for Payment (a tax bill);
- You neglected or refused to pay the tax; and
- The ibet sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy. The ibet may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested. Please note: if the ibet levies your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy.
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The ibet sent you advance notification of Third Party Contact notifying you that ibet may contact third parties regarding the determination or collection of your tax liability.
When will the ibet issue a levy?
If you do not pay your taxes (or make arrangements to settle your debt), and the ibet determines that a levy is the next appropriate action, the ibet may levy any property or right to property you own or have an interest in. For instance, the ibet could levy property that is yours, but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions). Or, the ibet could seize and sell property that you hold (such as your car, boat or house).