IRS Collections Guide
What Is a Tax Levy? How the IRS
Seizes Property and How to Stop It
A tax levy is the IRS’s legal seizure of your property or income. It is not a warning — it’s the enforcement action. Here’s what it means, what types exist, and what your rights are before it happens.
If you received Letter 1058 or LT11
That is the IRS’s Final Notice of Intent to Levy. You have 30 days from the date on that letter to request a Collection Due Process (CDP) hearing using Form 12153. Filing that request stops the levy while the hearing is pending. After 30 days, that right is gone.
The Short Version
A tax levy is the IRS’s legal seizure of your property or income to satisfy a tax debt.
It is the enforcement step — the IRS has assessed the tax, sent notices, and now it is taking action. People often confuse a levy with a lien. The distinction matters. A lien is a legal claim the IRS records against your assets — it affects your credit and your ability to sell property, but nothing has been taken. A levy is when the IRS actually takes it: money from your bank account, a portion of your paycheck, or physical property.
The rest of this guide covers the mechanics: the different types of levies, the IRS notice sequence that precedes one, your legal rights to contest it, and the options available once a levy is in progress.
Lien vs. Levy: The Critical Distinction
A lien is a legal claim. A levy is the actual seizure. The lien comes first — it’s the IRS’s public notice that it has a claim against your assets. The levy is the step where the IRS collects on that claim.
Under IRC § 6321, a federal tax lien arises automatically when the IRS assesses a tax, demands payment, and the taxpayer fails to pay. The IRS then files a Notice of Federal Tax Lien (NFTL) with the county recorder’s office to make that claim public. At that point, your credit is affected and your ability to sell or refinance assets is complicated — but no money has moved.
A levy, authorized under IRC § 6331, is the next step. The IRS uses it to actually collect: seizing funds from a bank account, garnishing wages, pulling money from a brokerage account, or taking physical property. A levy requires additional procedural steps beyond the lien — the IRS has to issue a Final Notice of Intent to Levy and wait out a 30-day window before it can act.
| Feature | Tax Lien | Tax Levy |
|---|---|---|
| What it is | Legal claim against property | Actual seizure of property or income |
| Effect on taxpayer | Affects credit, complicates sale or refinance | Money taken or wages reduced immediately |
| Public record | Yes — filed with county recorder | Not a public filing |
| Governing statute | IRC § 6321 | IRC § 6331 |
| Required notice | Notice and Demand for Payment | Final Notice of Intent to Levy (Letter 1058 / LT11) |
| Comes first? | Yes — lien precedes levy | No — levy follows lien and notice sequence |
Types of IRS Levies
The IRS can levy bank accounts, wages, accounts receivable, real property, and other assets. The type of levy determines what is seized and how quickly the funds move.
| Levy Type | What the IRS Takes | Key Detail |
|---|---|---|
| Bank Levy | Funds in your checking, savings, or money market accounts | Captures the balance on the date of levy; 21-day hold before funds are sent to IRS |
| Wage Levy (Garnishment) | A portion of each paycheck | Continuous — applies to every pay period until released; exempt amount set by IRS Publication 1494 |
| Accounts Receivable Levy | Money owed to your business by clients or customers | IRS notifies your clients directly; they send payment to the IRS instead of you |
| State Tax Refund Levy | Your state income tax refund | IRS intercepts the refund before it reaches you; automated process |
| Property Seizure | Real estate, vehicles, business assets, equipment | Less common; IRS must determine the equity in the property exceeds the costs of seizure and sale |
Bank Levy: The 21-Day Window
When the IRS serves a bank levy, your bank freezes the balance in your account as of that date and holds it for 21 days. That hold is your window to act. If you can resolve the underlying issue — through payment, an installment agreement, or a CDP hearing request — the bank can release the funds before they are sent to the IRS.
Importantly, the levy captures only the balance on the day it is served. Deposits you make after the levy date are not captured by that levy. But the IRS can — and typically does — serve additional levies if the debt is not resolved.
Wage Levy: Continuous Until Released
A wage levy is a continuous levy, meaning it keeps running with each pay period. Your employer receives a Notice of Levy on Wages, Salary, and Other Income (Form 668-W) and is required to withhold a portion of each paycheck. The amount you keep is the exempt portion — calculated based on your filing status and number of dependents using the table in IRS Publication 1494.
The IRS is entitled to everything above the exempt amount. For a single filer with no dependents in 2026, the exempt amount is relatively modest. The practical effect on take-home pay can be significant, and the levy continues until the IRS releases it or the debt is resolved.
How the IRS Gets to a Levy
The IRS is required to follow a specific notice sequence before it can levy. The sequence ends with a Final Notice of Intent to Levy — and that notice triggers your most important right.
Under IRC § 6330, the IRS cannot levy until it has completed the required notice sequence. In order:
- Assessment. The IRS assesses the tax — meaning it officially records the liability. This follows a return filed by the taxpayer, an audit, or a substitute-for-return filing by the IRS.
- Notice and Demand for Payment. The IRS sends a bill. You generally have 10 days to pay after receiving the Notice and Demand before the federal tax lien arises automatically.
- Final Notice of Intent to Levy (Letter 1058 or LT11). This is the critical notice. It formally informs you that the IRS intends to levy, and it notifies you of your right to request a Collection Due Process (CDP) hearing. You have 30 days from the date on this letter to act.
The IRS is generally prohibited from levying during the 30-day window after the Final Notice. If you file a CDP hearing request within that window, the prohibition extends through the pendency of the hearing and any subsequent appeals.
There is an exception: the IRS can levy without the full notice sequence if it determines there is a “jeopardy” to tax collection — for example, if it believes you are about to move assets out of the country. Jeopardy levies are rare and subject to their own appeal procedures under IRC § 7429.
Your Collection Due Process Rights
The 30-day window after Letter 1058 or LT11 is the most valuable window in the IRS collections process. Filing Form 12153 during that window legally prohibits the IRS from levying while your hearing is pending.
The Collection Due Process right was created by the IRS Restructuring and Reform Act of 1998 — it’s one of the more significant taxpayer protections in the collections process. Here is how it works in practice:
- Request deadline: 30 days from the date on Letter 1058 or LT11. The date of the letter, not the date you received it. Mail delays do not extend the deadline.
- How to request: File Form 12153 (Request for a Collection Due Process or Equivalent Hearing) with the IRS Appeals office address listed on the notice.
- Effect of filing: The IRS is legally prohibited from levying while the CDP hearing request is pending and during any subsequent judicial review. For bank accounts and wages, this is meaningful — the freeze lifts.
- What you can raise: In the hearing, you can propose collection alternatives (installment agreement, Offer in Compromise, Currently Not Collectible status), challenge the underlying liability if you never had a prior opportunity to contest it, or raise spousal defenses.
- After the 30-day window: You can still request an Equivalent Hearing within one year of the Final Notice, but filing an Equivalent Hearing request does not stop the levy.
Most people who receive Letter 1058 or LT11 do not know this right exists. The ones who do — and who act within the 30-day window — preserve options that are gone after the deadline. If you have received either of those letters, that window is the first thing to address.
How to Stop a Levy
The options for stopping or releasing a levy in progress:
- Pay the balance in full. The levy releases within 30 days of full payment. For a bank levy, the 21-day hold may still run its course if there is a delay in processing.
- Enter an installment agreement. The IRS is generally required to release a wage levy within 30 days of an installment agreement taking effect. Bank levies are addressed case by case, but an installment agreement typically results in a release.
- Offer in Compromise accepted. Once an OIC is accepted, the IRS releases any outstanding levies as part of the agreement. This takes time — the OIC process runs 6–12 months on average.
- Currently Not Collectible (CNC) status. If you can demonstrate that collecting the debt would create economic hardship — using the IRS’s Collection Financial Standards — the IRS can place your account in CNC status and release the levy. The debt remains; the active collection action stops.
- CDP hearing (if still within window). As described above — filing Form 12153 within 30 days of the Final Notice stops the levy while the hearing is pending.
- Bankruptcy. Filing for bankruptcy triggers an automatic stay under 11 U.S.C. § 362 that halts most collection actions, including levies. This is a temporary stop; the IRS can seek relief from the stay, and tax debts are not always dischargeable. Bankruptcy is a specific tool, not a general solution.
One path that does not work: ignoring the levy and hoping the IRS stops on its own. The IRS does not withdraw levies administratively without a reason. A wage levy will continue indefinitely until there is a release — or until the Collection Statute Expiration Date (CSED) under IRC § 6502 runs, which is ten years from assessment.
Getting a Levy Released
A levy release is the IRS’s formal withdrawal of the levy, issued on Form 668-D. Once a release is issued, your bank or employer is instructed to stop holding or withholding funds.
Form 668-D (Release of Levy) is the document the IRS sends to the third party — your bank, employer, or client — directing them to stop complying with the levy. You or your attorney should follow up to make sure the third party actually receives and processes it.
Under IRC § 6343, the IRS is required to release a levy when:
- The underlying tax liability has been satisfied or become unenforceable
- The release will facilitate collection (for example, you need access to funds to operate a business and pay the IRS under an agreement)
- An installment agreement has been entered into
- The levy is creating economic hardship — meaning it prevents the taxpayer from meeting basic living expenses
- The fair market value of the property exceeds the tax liability and a partial release would still allow the IRS to collect the full amount
In practice, IRS release timelines vary. A release tied to full payment or an installment agreement is usually processed within 30 days. Hardship releases and releases based on agreement terms can take longer, particularly when they involve coordination between the Collections division and an Appeals or Exam officer. If you are waiting on a release and it has been more than 30 days, follow up in writing and request a specific timeframe.
California FTB Levies
The California Franchise Tax Board has independent levy powers under the California Revenue and Taxation Code and can move faster than the IRS in some situations.
California state income tax collection is handled by the Franchise Tax Board (FTB), not the EDD or the CDTFA. The FTB has authority to levy bank accounts, wages, and accounts receivable under California Revenue and Taxation Code § 18817 and related provisions — the same general categories as the IRS, but with different procedural requirements.
A few differences worth knowing:
- Notice requirements. The FTB is required to send a Notice of Proposed Assessment and provide an opportunity to protest before collection action. The FTB’s notice sequence differs from the IRS’s, and the response deadlines are not always the same.
- Speed. In some cases the FTB moves to levy faster than the IRS — particularly on wage levies and bank levies where the FTB has already completed its assessment and notice sequence without a response from the taxpayer.
- Collection alternatives. The FTB offers installment agreements and hardship provisions, but the analysis is separate from any IRS resolution. Resolving your federal tax debt does not resolve your California state tax debt, and vice versa.
- Interaction with IRS matters. If the IRS and FTB are both levying simultaneously — which happens when a taxpayer owes both federal and state — the priority rules and available funds can get complicated quickly. Both need to be addressed in parallel.
If you have received a notice from the FTB and have a parallel IRS matter, those are two separate resolution tracks. We handle both.
When to Call an Attorney
The 30-day CDP window after Letter 1058 or LT11 is the point where having an attorney matters most. After that window closes, the available options narrow significantly.
For most taxpayers, the IRS collections process moves slowly — there are months between the first notice and a Final Notice of Intent to Levy. The period between the Final Notice and the 30-day CDP deadline is the exception. That is a short, hard deadline with meaningful legal consequences.
A tax attorney is particularly useful at that stage because:
- The CDP hearing request has to be filed correctly — the wrong form or the wrong office can result in a rejected request that does not stop the levy.
- The hearing itself is an opportunity to propose a collection alternative (installment agreement, OIC, CNC) and get the IRS collections division and an Appeals officer to the table at the same time.
- If the underlying liability is incorrect — the result of an audit you disagree with or a return you never filed — the CDP hearing may be your last opportunity to challenge it before the IRS proceeds with enforcement.
If a levy is already in progress, the focus shifts to the fastest available release path given your financial situation. That analysis — which alternative applies to your facts, how long it takes, and what supporting documentation the IRS needs — is what we do in the IRS collections practice on a daily basis.
If you have received Letter 1058 or LT11, or if you are already dealing with a bank or wage levy, we can walk through your options on a free 15-minute call.
Received Letter 1058 or LT11?
You have 30 days from the date on that letter. We can file the CDP hearing request, stop the levy, and work through your resolution options — starting with a free 15-minute call.
Frequently Asked Questions
What is a tax levy?
A tax levy is the IRS’s legal seizure of your property or income to satisfy a tax debt. It is the enforcement action — not a warning. Under IRC § 6331, the IRS has broad authority to levy wages, bank accounts, accounts receivable, and physical property once the required notice sequence is complete. The lien (a legal claim against property) comes first; the levy is the actual collection.
What is the difference between a lien and a levy?
A lien is a legal claim the IRS records against your assets under IRC § 6321. It affects your credit and complicates the sale or refinancing of property, but nothing has been taken. A levy is the seizure itself — the IRS takes money from your bank account, garnishes your wages, or seizes property. The lien comes first; the levy is the enforcement step that follows if the debt is not resolved.
How does an IRS bank levy work?
When the IRS serves a bank levy, your bank freezes the account balance as of that date. The bank holds those funds for 21 days before sending them to the IRS. That 21-day window is your opportunity to resolve the issue and request a release. Deposits made after the levy date are not captured by the same levy — but the IRS can serve additional levies if the underlying debt is not addressed.
What is a wage levy (wage garnishment)?
A wage levy is a continuous levy — it applies to every pay period until the IRS releases it. Your employer receives Form 668-W and must withhold a portion of each paycheck. The exempt amount is based on your filing status and number of dependents, using the IRS table in Publication 1494. Unlike a bank levy, a wage levy does not expire after 21 days — it continues until the IRS issues a release or the debt is satisfied.
What is Letter 1058 or LT11?
Both are forms of the IRS’s Final Notice of Intent to Levy and Notice of Your Right to a Hearing under IRC § 6330. They trigger your 30-day window to file a CDP hearing request using Form 12153. If you file within that window, the IRS is prohibited from levying while the hearing is pending. After 30 days, that protection is gone — though you retain the right to an Equivalent Hearing for up to one year, which does not stop the levy.
How do I stop an IRS levy?
Before a levy happens, the most effective step is filing a CDP hearing request within 30 days of Letter 1058 or LT11. Once a levy is already in progress, options include entering an installment agreement (which typically results in a wage levy release within 30 days), qualifying for Currently Not Collectible status, an accepted Offer in Compromise, or full payment of the balance. Bankruptcy triggers an automatic stay but does not resolve the underlying debt.
Does the California FTB have levy powers?
Yes. The FTB can levy bank accounts, wages, and accounts receivable under California Revenue and Taxation Code § 18817. The FTB’s notice requirements and timelines differ from the IRS’s — and in some cases the FTB moves faster. A California state tax levy is a separate matter from any IRS collection action and requires its own resolution.
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We handle IRS and FTB collections matters — levies, liens, CDP hearings, installment agreements, and Offers in Compromise. The earlier we are involved, the more options you have.