A levy is a legal seizure of your property to satisfy a debt. Levies are one method that the IRS uses to collect back taxes. Using a levy, the IRS can seize and sell any property that you own or have an interest in, including a house, car, wages, bank accounts, and more.
The IRS will not issue a levy until after they have sent you a formal notice that you owe money and you have refused or neglected to the pay the tax. They will send a final notice at least 30 days before they act on the levy.
The IRS does not have to go to court to seize the property. Once they have given you the required notice, they can begin to take your property or money and can continue until the tax debt is repaid.
Part of the purpose of the 30-day notice period is to allow taxpayers the opportunity to request a hearing to discuss or contest the taxes. You can also submit an offer to compromise where you work with the IRS to create a plan to settle the taxes due. During the time of the hearing or the consideration of the offer to compromise, the levy is put on hold and the IRS will not seize any property or money.
Because you have a legal obligation to pay taxes, the IRS has the right to take action against you if the taxes are not paid. However, if you have declared bankruptcy, the bankruptcy gives you protection behind the “automatic stay” order that prohibits creditors from taking any collective action. This means that the IRS cannot issue or begin collecting on a levy once you have declared bankruptcy. If the IRS has already begun levying your property or accounts, filing bankruptcy can stop the levy.
An IRS levy notice should never be ignored. If you owe back taxes or have received a levy notice, you should talk with a tax attorney or bankruptcy attorney to discuss the best course of action for your situation.