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Federal Tax Problems: Common Tax Levies

Get expert help with federal tax debtWhen you owe federal tax debt to the IRS, you may feel scared and confused. The best defense is having as much federal tax knowledge as you can, learning about the most common IRS collection actions. An IRS levy is the weapon of choice for the IRS. It is used to collect the money you owe in federal tax debt.

The IRS can place federal tax levies on your bank accounts, income, property, and assets to collect as much as it can from you to put towards your back tax debt. Of course, you will get a notice at least a month before the IRS Levy is applied. However, if you miss the letters, or decide to ignore these warnings, you should know the different tax levies the IRS may place on you to collect. Below, we outline the three major types of IRS Levies the IRS can use to collect your federal tax debt.

An IRS levy can only be issued after the IRS calculates exactly what you owe in federal tax. You will then receive a "Notice and Demand for Payment" letter stating the sum of your tax debt. This notice must also be postmarked at least one month prior to the federal tax levy being enforced. To collect on your debt, the U.S. government can issue levies on practically anything you own of value.

Bank Accounts

The IRS will take any cash sitting in your bank accounts to cover what you owe in federal tax debt. First, the IRS will alert your bank of its plans to enforce a levy because of your federal tax issues. Your banking institution is legally bound to comply with the IRS. Second, your money is placed in a collateral account for about 3 weeks. At this time it would be in your best interest to consult with a federal tax specialist to get the levy discharged and negotiate a federal tax payment plan to pay what you owe.


If the bank levy does not pay your entire debt, the IRS will issue a levy on your income and your federal tax refunds. The IRS is required to attempt contact before issuing a wage levy (also known as a wage garnishment). Your employer will receive a notice from the IRS advising them of their intentions, and similar to a bank levy, your employer is legally required to adhere to the demands of the IRS. Based on your hourly wage or salary, the IRS can garnish between 50 and 75 percent of your salary to put towards your federal tax. This can be devastating to your finances. Releasing a wage levy is difficult to do on your own because the IRS has no incentive to negotiate now that it's receiving payments on your debt.

Property & Assets

If you have a large federal tax debt, the IRS will issue a property levy. With this in place, the IRS can take your property and assets and auction them to the highest bidder. The IRS can levy on your home, car, boat, antiques, IRAs, 401ks, and so on, to cover your IRS debt. Essentially, anything valuable that can be sold to pay what you owe in federal tax debt. During the 30 days after receiving the notice, you should try to reach an agreement for repayment with the help of a federal tax professional before your assets are sold.

Stopping Collections

A federal tax levy will be lifted if you completely pay off your federal tax, you have successfully negotiated a payment agreement, or the 10-year Statute of Limitations expires. There are not too many families that can afford to have any of these levies haunting them for 10 years, and many taxpayers are not in a financial situation to pay their entire federal tax debt in one payment, so the most sensible option is to reach a payment agreement to satisfy the debt and lift the levy.

Federal tax professionals are experienced in negotiating payment plans with the IRS. Our network includes tax specialists such as CPAs, Enrolled Agents and Federal Tax Attorneys who can lift most wage and bank levies within 48 hours, helping you get back on your feet quickly and repay your federal tax debt affordably. If you have IRS back tax issues, fill out the form below or call us today. Get a free consultation to discuss your federal tax debt options.

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