Liens, levies and wage garnishment: what the IRS can take and how to stop it

A lien is a claim against what you own; a levy is the taking of it. Almost everything you can do about either happens in the days after one particular letter arrives.

The letters that come before anything is taken

It starts with a bill for a balance due on a return you filed, then reminder notices saying the balance is open and a notice of federal tax lien can be filed.

Next is a notice of intent to levy. The IRS can then take a state tax refund and file the lien; a further notice may follow with a right to a hearing before Appeals, if none has yet.

Then, separately, the final notice of intent to levy, which also gives notice of your right to a hearing. That is the letter carrying the appeal right; the earlier notice of intent to levy does not start the hearing clock.

The thirty days that matter most

From the day the final notice reaches you, whether as a letter or an LT11-style notice, thirty days run in which to ask for a collection due process hearing, on Form 12153.

That hearing has limits. Appeals will consider collection alternatives, and a request sent with a collection information statement is decided faster, but whether you owe the amount at all can be raised only in narrowly limited situations. Three routes reopen the amount itself: pay the balance, then file a claim for refund; ask for an audit reconsideration, which needs information the agency has not seen; or make an offer in compromise on doubt as to liability. A separate, quicker appeal program covers some collection actions, and the thirty days is the ordinary rule with narrow exceptions.

What a levy can reach, and the two clocks inside one

A levy is the legal seizure of what you own to settle a tax debt. Wages can be garnished, money in a bank or similar account taken, and a vehicle, real estate or other personal property seized and sold.

A wage levy keeps running: a slice of each pay period goes to the IRS until you make other arrangements, the overdue amount is paid, or the levy is released. Part of your pay is exempt, and how much depends on your filing status, pay period and dependents; Publication 1494 goes to the employer with the levy and explains it. Your employer will give you a statement to complete, listing filing status and dependents, and it has to go back within three days. Miss that and the exempt amount is figured as though you were married filing separately with nobody to claim. Returning that form is the highest-value thing a garnished reader can do.

A bank levy is different. Whatever is in the account when the levy is received is frozen; money paid in afterwards is normally untouched. Twenty-one days pass before the bank sends the money on, and the gap exists so you can make contact and arrange to pay, or say the levy is wrong.

What actually stops it

Paying in full stops it, and so does an arrangement. No new levy can be issued while a payment plan or an offer in compromise is running or pending, or where the IRS accepts that hardship prevents you paying, meaning that taking your property would leave you unable to meet basic, reasonable living costs. That stops the next levy; it does not undo one already served.

An installment agreement is the ordinary route, and applying online is quickest. Where you genuinely cannot pay, the account may go into currently not collectible status: most collection activity is suspended for a time, you still owe the whole balance and none of it is forgiven or canceled, and penalties and interest keep building until it is cleared. A collection information statement is usually wanted first. For a levy already in place, the IRS names two grounds for release: immediate economic hardship, and a levy issued in error. If you cannot pay in full and how to pay the IRS cover the options.

The lien is a different animal

A federal tax lien is the claim the government holds over everything you own once a tax debt goes unpaid. It exists after three things: the IRS assesses the liability, sends a bill demanding payment, and you fail to pay in full in time. The notice of federal tax lien is the public filing that tells creditors, and it reaches your assets and those you later acquire while it lasts.

Paying the debt in full is how it ends, and the lien is released within thirty days of payment. Three lesser remedies exist: a discharge lifts the lien from one piece of property; subordination leaves it in place but lets other creditors take priority over the IRS, which is what a refinance usually needs; a withdrawal pulls back the public notice while leaving you owing the balance, on Form 12277.

The withdrawal route most readers can use runs through a direct debit installment agreement. Enter one, or convert an existing agreement into one, and the notice may be withdrawn where all of these hold: you are a qualifying taxpayer; you owe $25,000 or less; the agreement clears what you owe inside sixty months, or by the time the collection statute expires, whichever falls first; you are up to date with your other filing and payment obligations; three direct debit payments have gone through in a row; and you have not defaulted on this or on any earlier direct debit agreement.

When to stop reading and get someone

A final notice received, wages already going out, employment tax debt in a business, or several unfiled years under the balance are points where representation changes the handling. Years of unfiled returns covers the filing side, and authorizing your preparer covers how someone else speaks to the IRS for you. Nobody can promise a particular result.