What is Levy Tax?

A tax levy is a legal seizure of property to satisfy a tax debt.  A taxing authority may levy against real estate, personal property, bank accounts, wages, commissions, rental income, retirement accounts, state income tax refunds, and the cash value of life insurance policies.

Types of Tax Levies

There are several types of tax levies.  The most common are:

• Federal Tax Levy – A federal tax levy is imposed for the collection of past due federal income taxes.  A federal tax levy usually happens only after the IRS has assessed the tax and made a demand for payment, the taxpayer has failed or refused to pay the tax, and the IRS has sent a Final Notice of Intent to Levy to the taxpayer.
• State Tax Levy – A state tax levy is imposed for the collection of past due state income taxes.  State law governs the process a state taxing authority must follow before initiating a state tax levy.
• Property Tax Levy – A property tax levy is imposed for the collection of past due property taxes.  In most states, a property tax levy is known as a tax sale and state law governs the process a city or county tax commissioner must follow in order to move forward with a property tax levy.

IRS Collections

The IRS collections process is very aggressive.  The IRS typically goes after assets which are the easiest to collect, such as bank accounts and wages.  Once the IRS collections department levies on your bank account, your bank must hold all funds you have on deposit, up to the amount you owe the IRS, for 21 days while any disputes over account ownership are resolved.

What Happens After the Taxes Have Been Paid?

After the taxes have been paid in full, the taxing authority must release the lien or notice of levy.  The tax levy must also be released if the legal period for collecting the tax has expired.

Getting Legal Help from an Attorney

If you owe back federal or state income taxes, you should contact an experienced tax attorney to review your case.  A qualified tax attorney will help you negotiate an offer in compromise or a payment plan with the taxing authority.