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  • Robert Nath

IRS Levies

Updated: Mar 14, 2022

What is an IRS “levy?”

An IRS levy is a piece of paper the IRS sends to your bank, broker, employer, etc. That piece of paper legally seizes (levies) your property in their hands, and compels them to send the property to the IRS.

What’s the difference between a tax lien and a tax levy?

Any “lien” is a legal charge or encumbrance on property. Examples include your home mortgage or the lien on your car if you have a car loan. A levy is the actual seizure of assets. So these two instruments are very different. A lien does not seize anything; it “encumbers” assets (by law, all your assets). A levy is the seizure. Can you go to court to stop the IRS from seizing assets? Normally, no. That’s been the law forever and has been enshrined in numerous Supreme Court cases. Don’t waste your time going to court for this purpose. Federal law forbids any court from “enjoining” (issuing an injunction against) the assessment or collection of taxes. There are a few exceptions, again authorized by law, that arise in rare circumstances. Those rare cases are ones in which the IRS clearly is in violation of some tax provisions. So your best chance of resolving many tax disputes is at the IRS level, not in court.

Can an IRS levy take my Social Security benefits? My IRA? Retirement accounts? My salary?

Yes. Social security benefits (up to 15%) are not exempt from IRS levy, even if other laws, such as state laws, protect them. IRAs and other retirement accounts are fully exposed, so long as you have full access to them. Some retirement assets are protected by time; that is, you have no “vested” right to certain benefits until you reach, say, retirement age. Those benefits can’t be seized by the IRS, at least until you can get to them.

What about my inheritance? Is that subject to seizure?

Yes, if you have a present, actual, matured legal right under a will; no if you do not. The difference is this: if you are named in a will, normally you have no legal right to anything. It’s an expectancy; your father, mother, wife, husband, etc. can change it at any time before they die. You have no right. That situation changes when the person dies, and you now suddenly have a legally protected interest under a will. The “borderline” cases – a parent is about to pass away; death is immanent – can vary in result.

My wife and I own a home with $100,000 of equity. But I owe taxes ($70,000). Can the IRS seize and sell our home for my taxes, if we own the home as “tenants by the entirety?”

Yes, though this IRS right depends on the law of the state in which your property is located. The law is still evolving in the courts on this point. Before 1983, the general rule in most states was that the IRS could not take (levy, seize) property owned “by the entireties” (husband and wife) and sell it, to pay the debts of only one of the two tenants. (This was originally a “widow’s protection” statute.) In 1983 and 2002, the IRS won Supreme Court cases that, read together, allow the IRS to do just that. The agency is reluctant to exercise this power. Even so, you still must do something about that tax debt. You may be eligible for an offer in compromise (to pay a reduced amount – possibly only a fraction of what you owe), or other payment arrangement, depending on your facts.

How often does the IRS resort to the tax levy?

Usually, it’s a last resort. The IRS tries to work out payment plans with you. You can also try to resolve your case in many ways – offer in compromise, installment agreement, even bankruptcy in some cases. So an actual levy is available, but the IRS does not use it right away. Of course if you ignore them, the levy is certainly a good way to get your attention.

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