Tax Levy

HR Glossary for HR Professionals

Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

Tax Levy

What is a Tax Levy?

A tax levy is a collection process used by the IRS where a taxpayer’s assets are legally seized to satisfy a tax liability.

What Actions Will the IRS Take Before Issuing a Tax Levy?

In most instances, the IRS will only issue a tax levy after the following three steps have already been taken:

  1. The IRS assessed the tax and issued a bill for payment in the form of a Notice and Demand for Payment 
  2. The individual in question did not pay the tax
  3. The IRS sent a levy notice—known as an Intent to Levy and Notice of Your Right to A Hearing—at least 30 days prior to the levy

When Does the IRS Issue a Tax Levy?

The IRS typically issues a tax levy if an individual does not pay their taxes and the IRS determines that the next appropriate action is to issue the levy.

How Do You Avoid a Tax Levy?

According to the IRS, there are a few different ways to avoid a tax levy:

  1. Filing your return and paying your taxes on time
  2. Request an extension on your tax return if you cannot file or pay on time
  3. Work with the IRS to pay off the debt if you can’t immediately settle the amount; the IRS also lists the various ways in which taxpayers can pay their taxes

How Do You Get a Tax Levy Released?

To have a tax levy released, an individual must immediately request a release from the IRS. There is also a comprehensive appeals process that an individual can undertake with the IRS, including if the levy “can cause immediate economic hardship.”

According to the IRS, the agency must release a tax levy under the following conditions:

  • The person paid the amount they owed
  • The period for collection ended before the levy was issued
  • Releasing the levy will help the individual pay their taxes
  • The individual enters into an Installment Agreement and the terms of the agreement stipulate that the levy will not continue 
  • The levy creates an economic hardship (the levy prevents you from meeting basic, reasonable living expenses)
  • The value of the property is more than the amount owed and releasing the levy will not hinder the IRS’s ability to collect the amount owed

Related Terms: Compensation

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