If you’ve ever opened your bank statement only to see funds frozen – or received a chilling letter saying your wages are being garnished – you know the crisis of a tax levy. A tax levy means the IRS (or state authority) can legally seize your assets – wages, bank accounts, even Social Security – to satisfy an unpaid tax debt. In the Dallas–Fort Worth–Frisco area, local practitioners report a noticeable uptick in levy actions as the IRS ramped up collections post-pandemic. Levies don’t just drain your funds; they upend your life. Without access to your money, you can’t pay rent, cover utilities, or support your family. Every day a levy remains active, penalties and interest pile up, compounding your hardship. This guide will demystify the levy process – answering questions like what is a tax levy?, what are the types of tax levy?, and how does a tax levy work? You’ll learn the key differences between a tax levy vs. a tax lien, discover how to stop a tax levy, and explore proven resolution strategies. Armed with this knowledge – and the right legal support – you can protect your assets and regain financial stability.
What is a Tax Levy?
A tax levy is the most aggressive collection tool available to tax authorities. It is a legal seizure of your assets to satisfy an outstanding tax debt. Unlike a tax lien – which only places a claim on property – a levy actually takes the property or funds.
Assets Subject to Levy
Tax authorities can levy a broad range of assets, including:
- Wages (wage garnishment)
- Bank accounts (bank levy)
- Retirement income and Social Security benefits
- Investment accounts and accounts receivable
- Physical property: homes, vehicles, personal belongings
When the IRS levies, it typically sends your bank or employer a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing. You have 30 days after that notice to resolve the debt or request an appeal before seizure occurs.
What are the Types of Tax Levy?
The IRS (and state tax agencies) can choose from several levy types to collect unpaid taxes. Each method targets a different asset or source of income. Common levy types include:
Wage Garnishment
The IRS sends your employer a levy notice, requiring them to withhold a percentage of each paycheck – typically up to 15% of your disposable earnings – until your balance plus penalties and interest is paid in full.
Bank Levy
Your bank is instructed to freeze (“hold”) the funds in your account for 21 days. If you do not resolve the debt within that period, the bank must remit the frozen balance to the IRS. If the balance doesn’t cover the full amount owed, repeated levies may occur.
1099 Levy
Also known as an accounts receivable levy, this directs payers – for example, freelance clients or gig platforms – to send any future 1099 payments directly to the IRS rather than to you.
Reduced Tax Refunds
The IRS (or state tax authority) may keep all or part of your upcoming federal and/or state tax refund to satisfy unpaid tax debt. You’ll receive notice if your refund is going to be offset.
Property Seizure
Any real or personal property you own – from your home and vehicles to boats and collectibles – can be seized and sold at auction. The proceeds then apply toward your tax liability.
Other Asset Seizure
Beyond cash and real estate, the IRS can levy:
- Retirement plan distributions (IRAs, 401(k)s)
- Insurance policy proceeds and dividends
- Stock dividends and other investment income
- Licenses or permits that have monetary value
- Accounts receivable, if you run a business.
Seizure of Passports
If you owe more than $50,000 (including penalties and interest), the IRS may certify that debt to the State Department. This can lead to passport denial or revocation until you resolve the outstanding tax balance.
How Does a Tax Levy Work?
Understanding the levy process helps you act before your assets are seized. Here’s a step-by-step breakdown of how a tax levy typically unfolds:
1. Issuance of a Levy Notice
- The IRS sends a Final Notice of Intent to Levy (Letter 1058 or LT11) after issuing earlier notices (CP501, CP502, CP503, CP504) informing you of your balance due.
- You have 30 days from that final notice to pay, enter into an agreement, or request a Collection Due Process hearing to stop the levy.
2. Seizure of Assets
- If no action is taken, the IRS can legally seize assets subject to levy, including wages, bank accounts, and personal property.
- For a bank levy, your bank must freeze your account for 21 days before remitting the funds to the IRS.
3. Notice to Third Parties
- In a 1099 levy, the IRS notifies third-party payers (such as employers or clients) to divert future payments directly to the IRS.
- This applies equally to freelance platforms, gig economy payouts, and other accounts receivable.
4. Sale of Seized Assets
- For levied property (e.g., vehicles, real estate), the IRS arranges a public auction.
- Proceeds from the sale are applied to your outstanding tax debt. Any surplus is returned to you.
5. Notification of Levy Completion
- After assets are seized or payments applied, the IRS issues a Notice of Levy closure.
- This notice confirms that the levy action is complete and details any remaining balance.
6. Legal Ramifications
- A levy can affect credit scores, loan eligibility, and financial stability.
- State tax authorities may also impose levies, which function similarly to federal levies but under state law.
7. Appeals and Resolutions
- You can file an Appeal or request a Collection Due Process hearing within 30 days of the Final Notice (LT11) to contest the levy.
- Alternative resolutions include:
- Installment Agreements to spread payments over time
- Offer in Compromise to settle for less than owed
- Currently Not Collectible status to pause enforcement
Acting promptly – ideally before the 30-day window closes – gives you the best chance to halt a levy and negotiate relief.
Difference between a Tax Lien and a Tax Levy
Understanding the distinction between a tax lien and a tax levy is crucial in tackling IRS collection actions:
- Tax Lien
- A lien is a legal claim against your property when you fail to settle tax debt.
- It protects the government’s interest, but does not take your assets; you retain possession and use.
- Liens are often the precursor to levies and can affect credit, making it hard to sell or refinance property.
- Tax Levy
- A levy is an actual seizure of property or funds to satisfy tax debt.
- The IRS can garnish wages, freeze bank accounts, or auction property without further notice after the levy notice period.
In short: A lien stakes a claim; a levy takes the asset.
How Can I Stop a Tax Levy?
Stopping a tax levy requires prompt action and knowledge of your available options. Here are the primary ways to get released from a levy:
-
Full Payment of Tax Debt
- Pay the balance in full – including penalties and interest – before the 30-day deadline following the Final Notice of Intent to Levy (LT11).
- Once payment is received, the IRS will release the levy and return any seized funds.
-
Request a Collection Due Process (CDP) Hearing
- File Form 12153 within 30 days of the LT11 notice to appeal the levy and present your case.
- A successful appeal can halt the levy while the IRS reviews your hardship or procedural objections.
-
Installment Agreement
- Enter into an IRS installment agreement (Form 9465) to spread payments over time.
- Request a direct-debit plan to automatically withhold monthly payments and stop levy actions.
-
Offer in Compromise (OIC)
- Submit an OIC (Forms 656 & 433-A) if you cannot afford the full debt.
- If accepted, the IRS will release existing levies and settle your tax debt for the agreed amount.
-
Currently Not Collectible (CNC) Status
- Demonstrate financial hardship via Form 433-F to qualify for CNC status.
- The IRS will suspend levy actions until your situation improves, though interest continues to accrue.
-
Penalty Abatement or Innocent Spouse Relief
- Seek penalty abatement (Form 843) if a levy arises from penalties you qualify to have reduced or removed.
- Innocent spouse relief may remove joint liability, stopping levies on your separate assets.
Act within 30 days of the Final Notice of Intent to Levy to prevent asset seizure.
Tax Levies and Their Resolution
Each levy type triggers specific relief strategies tailored to the asset or income source seized. Below is a breakdown of common levies and the most effective resolution options for each:
Wage Garnishment
When the IRS garnishes your wages, consider:
- Installment Agreement (Form 9465) to spread payments and halt future garnishments
- Currently Not Collectible (CNC) status (Form 433-F) if garnishment causes undue hardship
- Collection Due Process (CDP) hearing (Form 12153) to appeal before the levy continues
Bank Levy
If your bank account is frozen, you can:
- Emergency Release by demonstrating basic living expense hardship
- Offer in Compromise (OIC) (Forms 656 & 433-A) to settle for less than the full debt, prompting the levy release
- Full Payment to immediately unlock frozen funds
1099 Levy (Accounts Receivable)
For levied freelance or gig payments:
- Negotiate an Installment Agreement to divert future payments back to you
- Submit a CDP hearing request arguing procedural errors or hardship
- Use Penalty Abatement (Form 843) if levied due to assessable penalties
Reduced Tax Refunds
When your refund is offset:
- Apply for OIC to reduce overall liability and reclaim future refunds
- File missing returns and enter an Installment Agreement to avoid future offsets
- Request CNC status if the refund offset causes essential expense hardship
Property & Other Asset Seizure
If real estate, vehicles, or investments are at risk:
- File a CDP appeal before the auction to challenge valuation or procedure
- Propose an Installment Agreement or OIC to stop the sale
- Seek a Lien Withdrawal/Subordination to preserve collateral once you secure an agreement
Passport Revocation Risk
For debts over $50,000:
- Enter a Direct Debit Installment Agreement to meet IRS criteria for reinstatement
- Negotiate an OIC to reduce your liability below the revocation threshold
By matching each levy type with the most relevant relief option, you can effectively target and resolve the specific enforcement action affecting you – regaining access to your assets and restoring financial stability.
Why Choose the Law Offices of Nick Nemeth For Your Tax Levy Resolution?
When facing an IRS tax levy, having a seasoned advocate on your side can mean the difference between regaining financial stability and enduring prolonged hardship. Here’s why taxpayers in Dallas, Fort Worth, and Frisco trust our team:
- Specialist Levy Knowledge and Experience
Our attorneys focus exclusively on tax levy relief, mastering the nuances of IRS collection procedures and state-level enforcement. - Proactive Levy Defense
We prepare and file appeals (CDP hearings), negotiate Installment Agreements and Offers in Compromise, and secure Currently Not Collectible statuses – often stopping levies before they begin. - Tailored, Local Service
With offices in North Texas, we understand regional variations in state levy procedures. You’ll work directly with your attorney, not a call center. - Full-Spectrum Representation
From initial levy notices to public asset auctions, we handle every interaction with the IRS – drafting forms, responding to information requests, and representing you in appeals or the Tax Court as needed. - Transparent, Upfront Fees
We offer fixed-fee packages for common levy resolutions and custom quotes for complex cases – no hidden charges or surprise bills. - Peace of Mind
Knowing a legal professional is safeguarding your rights allows you to focus on your family and business, rather than worrying about frozen assets or garnished wages.
Schedule a Consultation Today
Don’t let a tax levy derail your life or business. Whether you’re facing a wage garnishment, bank levy, or property seizure, prompt action is essential to protect your assets and stop the IRS in its tracks. At the Law Offices of Nick Nemeth in North Texas, our team combines deep levy-resolution experience with personalized service – handling appeals, negotiating payment plans, and securing hardship releases so you can breathe easier. Reach out today for a free consultation and take the first step toward lifting the levy, restoring your financial freedom, and moving forward with confidence. To discuss your requirements and consult tax attorneys in Dallas, Fort Worth, or Frisco, TX, call (972) 426-2553. Alternatively, you can also fill out our contact form, and our representative will reach out to you at the earliest.
FAQs
1. How is a tax levy imposed by the IRS?
The IRS issues a Final Notice of Intent to Levy (LT11) after multiple demand notices. If you don’t pay or appeal within 30 days, the IRS can seize assets – wages, bank accounts, or property – to satisfy your debt.
2. What happens when a bank levy is executed?
A bank levy freezes your account for 21 days (“levy hold”). If you don’t resolve the debt, the bank must turn over the frozen funds to the IRS. In Dallas–Fort Worth, repeated levies can occur until your liability is cleared.
3. How does wage garnishment for tax levies work in Texas?
Under Texas law, the IRS can garnish up to 15% of your disposable earnings. Your employer must withhold that amount from paychecks in Frisco, Fort Worth, or any other location and remit it directly to the IRS until the debt is paid.
4. What is the difference between a tax lien and a tax levy?
A tax lien is a legal claim on your property, while a tax levy is the actual seizure of assets or funds. Liens affect credit; levies remove your assets to satisfy your tax debt.
5. How can I stop an IRS tax levy in Dallas?
You can halt a levy by paying your balance in full, entering an Installment Agreement (Form 9465), submitting an Offer in Compromise (Form 656 & 433-A), or requesting Currently Not Collectible status (Form 433-F) within 30 days of the levy notice.
6. What relief options are available for a state tax levy in Texas?
Texas state levies follow similar rules: you can negotiate an installment plan, file for hardship status, or pursue an OIC with the Comptroller’s office. Local tax levy relief programs may also offer penalty abatement.
7. Can property be levied and seized in Fort Worth?
Yes. The IRS can levy real property – homes, land, vehicles – in Fort Worth. After a levy notice expires, the IRS auctions seized assets and applies the proceeds to your tax liability.
8. What are the legal consequences of an IRS levy causing hardship?
A levy can damage credit, complicate loan approvals, and disrupt your livelihood. If a levy causes undue hardship, you may qualify for an emergency release or levy relief, pausing enforcement while you negotiate a solution.
9. When does a 1099 levy apply, and how does it affect my income?
A 1099 levy directs third parties – like freelance clients – to send future 1099 payments directly to the IRS. This affects gig workers across Dallas and Frisco, diverting income until your tax debt is resolved.
10. Why should I hire a tax levy attorney in Dallas–Fort Worth?
A tax levy attorney understands IRS procedures, appeals processes, and local nuances. An experienced lawyer can negotiate Installment Agreements, file CDP appeals, and secure hardship releases – often stopping levies before assets are seized.
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