IRS Levies and Wage Levies: What the IRS Can Reach and What Is Exempt

“Levy” is the federal tax collection term for legally seizing property or rights to property. A wage garnishment by the IRS is generally a continuing levy on salary or wages, not a separate collection authority. Bank accounts, accounts receivable, investment accounts, certain government payments, and physical property can be reached under different procedures.

Bank Levies and Wage Levies Work Differently

A bank levy generally attaches to funds in the account when the bank receives the levy. The bank usually holds the funds for 21 days before sending them to the IRS, which creates a limited window to resolve errors or request release. A levy on wages, salary, or certain recurring payments generally continues from pay period to pay period until released, satisfied, or no longer enforceable.

The IRS Generally Must Provide Notice First

Before most levies, the IRS must assess the tax, send notice and demand for payment, and issue a final notice of intent to levy with the right to a Collection Due Process hearing at least 30 days before levy. Exceptions exist, including certain jeopardy, state-refund, federal-contractor, and disqualified-employment-tax levies. Prior hearing notices for the same tax and period also matter.

Some Property Is Exempt or Partly Protected

Section 6334 exempts specified property, including limited amounts of personal effects and tools, certain public benefits, unemployment benefits, workers' compensation, certain service-connected disability payments, and a calculated amount of wages needed for basic support. The exemptions are technical and do not mean all retirement, Social Security, disability, or household funds are automatically protected.

When a Levy Must or May Be Released

The IRS must release a levy in specified circumstances, including when the liability is satisfied, the collection period expires, release will facilitate collection, an installment agreement requires release, or the levy creates economic hardship for an individual taxpayer. A release does not erase the tax debt or automatically remove a federal tax lien.

Employers, banks, payment processors, and other third parties receiving a levy have legal response duties and should follow the levy instructions rather than informal directions from the taxpayer. Wrongful levy, levy on another person's property, and return-of-property claims have separate deadlines.

This article provides general federal tax information. The actual levy, prior notices, account transcript, property ownership, exemptions, and current collection status should be reviewed promptly.