Focused Attorneys Helping You Respond To Federal Tax Levies And Garnishments

IRS collection problems usually do not start with a surprise seizure. They start with notices, deadlines and a quiet legal claim against your property. Getting the right guidance and acting quickly can help keep a levy from turning into a permanent loss.

Insight Law is a focused Seattle tax law firm that handles IRS matters and Washington state tax problems under one roof. Since 2001, our attorney and team have kept the process practical and procedural, helping you understand what the IRS can do, when it can do it and what you can do to stop it.

Tax Lien Vs. Tax Levy

A tax lien is passive; it quietly attaches to a taxpayer’s property and protects the government’s interest until enforcement occurs. A tax levy is active; it is the IRS taking steps to collect by seizing property or intercepting money (bank funds, wages, receivables, etc.).

A levy generally reaches only property in existence (and obligations already owed) at the time the levy is served. If a levy doesn’t fully satisfy the tax debt, the IRS may levy again — “thereafter, and as often as may be necessary” — against other property until the balance (and expenses) is paid. In practical terms, the IRS can levy repeatedly across different asset sources.

How IRS Collections Escalate

After assessment, the IRS typically sends four or five notices. Three are legally required:

• Notice and Demand for Payment (IRC §6331(a))
• Notice of Intent to Levy (IRC §6331(d))
• Collection Due Process (CDP) Notice (often Letter 1058)

Your interests are usually best served by contacting a representative as early as possible in the notice phase to pursue a payment arrangement or other relief before enforcement begins.

CDP Hearings Can Stop Collection, But Deadlines Matter

After receiving a final levy notice, taxpayers may have administrative appeal rights called a Collection Due Process (CDP) hearing. During a timely CDP process, levy action is generally paused: IRC §6330(e)(1) provides that levy actions “shall be suspended” while the CDP hearing and appeals are pending.

However, you may not get a pre-levy hearing in certain situations such as jeopardy collection or in limited offset scenarios. However, you must still be offered a CDP hearing within a reasonable time after the levy.

The IRS Levy’s Reach Is Broad

A levy is a powerful collection tool. Subject to limited exemptions, it can reach nearly all property and rights to property. Items people often assume are “protected” can still be vulnerable unless a specific exemption applies.

It is important to understand the limits on levies. In many cases, the IRS cannot serve levies:

• While an Offer in Compromise (OIC) is pending
• Within 30 days after an OIC rejection
• During an OIC appeal

Exceptions exist if collection is in jeopardy, if the taxpayer waives the restriction in writing, or the OIC is made merely to delay collection. Similarly, absent jeopardy, a written waiver by the taxpayer or a request submitted merely to delay collection, no levies can be served while a proposal to pay a liability through installments is pending. A proposed installment agreement becomes pending when it is accepted for processing.

Levies and most other collection activity are suspended during the pendency of a bankruptcy proceeding pursuant to the automatic stay provisions of 11 U.S.C. § 362. Once the proceeding has been completed or if the government sought relief from the automatic stay per 11 U.S.C. § 361, the Service may levy on whatever property or property rights that are subject to the lien.

Understanding The Types Of Levies

Levies can take several different forms, and the way you handle each is different. Three types of levies you might experience include:

Levy Type No. 1: Bank Levies

When the IRS levies a bank account, the bank must typically hold the funds for 21 days before sending them to the IRS. The purpose of this “cooling-off” period is to give you time to resolve the delinquency or seek relief.

The timeline for this hold usually includes:

• Day 0: IRS serves levy on your bank, and your account funds are frozen.
• Days 1–21: The bank holds funds, but you may still be able to act.
• Day 21: The bank remits held funds to the IRS, which often cannot be reversed.

Understanding this timeline can be the first step in protecting your assets. The “real” deadline is not the notice date. It is the 21-day bank hold. Acting inside that window can be the difference between release and permanent loss of funds.

How could a bank levy impact Seattle residents? A Seattle restaurant owner could wake up to a frozen operating account the week payroll is due. Vendor payments would bounce, and delivery platforms would be at risk.

What can you do if you face a bank levy? First, confirm the levy date to know when the 21-day clock began. Then, gather proof of payroll, rent, essential bills and other costs that could document the hardship the bank levy has caused. While you are resolving the issue, avoid moving money in ways that create new problems. Call for a release request and explore resolution options.

Levy Type No. 2: Wage Levies (Continuous Garnishment)

The IRS can levy the non-exempt portion of wages or salary, commonly called wage garnishment. Critically, IRS wage levies are continuous. Unlike a one-time bank levy which attaches to funds on hand when served, a wage levy reaches future paychecks until the levy is released or the matter is resolved.

Wage levy exemptions depend on a variety of factors, including:

• Pay frequency: Whether your pay is weekly, biweekly or monthly changes the exempt calculation per pay period.
• Filing status: Whether you are single or married impacts the allowed exempt amount.
• Dependents or exemptions claimed: These details can increase the exempt portion of your wages.
• Your spouse’s income: This may affect the picture of the household’s finances.

Knowing these exemptions can limit the impact of a wage levy on your financial health.

How could a paycheck levy impact Seattle residents? A software engineer in South Lake Union might see an unexpected drop in take-home pay after HR receives an IRS wage levy. Because the levy is continuous, the pay reduction repeats every pay period until stopped, making early intervention essential.

What can you do to take action? The first step is often to get a copy of the levy and your “exempt amount” calculation. Then, request a levy release based on hardship or an accepted alternative. If you received a final notice, evaluate CDP rights immediately. Most of all, do not wait until next paycheck, because the levy will remain a challenge.

Levy Type No. 3: Third-Party Levies (Vendors, Clients And Receivables)

A notice of levy allows the IRS to reach property held by third parties (banks, payment processors, clients, vendors who owe you money). When served, the third party is generally required to surrender property subject to levy. A third party that fails or refuses to comply can face personal liability equal to the value not surrendered.

This mechanism can also reach amounts owed to the taxpayer. This means the IRS can intercept accounts receivable and other payments due.

How could a third party levy impact Seattle residents? A small firm may rely on a few large clients, but this could become challenging when a client receives an IRS levy notice and redirects a project payment to the IRS instead. Cash flow can collapse fast, even if the business is otherwise healthy.

What can you do in this situation? First, identify the bank, client, processor or vendor that received the levy. Then, move quickly to stop follow-on levies with a formal resolution path. You can protect operations by prioritizing payroll and essential expenses documentation. Finally, coordinate communications to prevent reputational fallout.

Hardship Releases: Many Levies Can Be Returned, But Time Is Critical

Many levies can be released (and, in some situations, funds can be returned) if they create financial hardship. However, as with the 21-day bank hold, time is of the essence. Once the bank remits funds after the hold period, options can narrow dramatically.

If you have been levied, the safest approach is to treat it as an emergency: document hardship, assert your procedural rights and pursue the fastest viable resolution. Acting quickly can help you pursue a CDP, OIC, installment agreement or Currently Not Collectible status where appropriate.

Act Quickly; Call Insight Law Today

You do not have to handle a levy on your own. Call Insight Law or complete our online contact form to get experienced guidance on how you can protect your rights.