What Is a Tax Levy? How the IRS Seizes Property and How to Stop It

Written by Sam Brotman, J.D., LL.M. (Taxation), MBA — Managing Attorney, Brotman Law  ·  Updated May 2026

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

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.

Types of IRS Levies

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

Under IRC § 6330, the IRS cannot levy until it has completed the required notice sequence. In order:

1. 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.
2. 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.
3. 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 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

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

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

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.