An IRS levy is the legal seizure of a taxpayer's property or income to pay a federal tax liability. A wage garnishment is one type of levy — but the IRS can also reach bank accounts, receivables, federal payments, retirement assets, investments, and physical property. This guide walks through the levy types, pre-levy procedure, exemptions under IRC §6334, release grounds under IRC §6343, and Collection Due Process appeal rights.
An at-a-glance view of every step covered in this guide.
A federal tax lien and an IRS levy are different. A federal tax lien under IRC §6321 is the government's legal claim against a taxpayer's property and rights to property. A levy under IRC §6331 is the actual taking of property, money, or income to satisfy the tax debt. In simple terms, a lien protects the government's interest in property, while a levy allows the IRS to collect from that property.
The IRS generally must (1) assess the tax, (2) send a Notice and Demand for Payment, (3) confirm the taxpayer neglects or refuses to pay, (4) send a Final Notice of Intent to Levy and Notice of the Right to a Hearing (Letter 1058, LT11, CP90, or similar), and (5) wait at least 30 days before proceeding. Under IRC §6330, the taxpayer generally has 30 days to request a Collection Due Process (CDP) hearing. Exceptions to the advance-notice requirement exist for jeopardy levies, state tax refund levies, certain federal contractor levies, and certain employment-tax situations (see IRC §§6330, 6331; IRM 5.11.1). Ignoring a final notice can cost important appeal rights.
A wage levy directs an employer to send part of the taxpayer's wages to the IRS. Unlike most bank levies, a wage levy is generally continuous under IRC §6331(e) and remains in effect for future pay periods until the debt is paid, the collection statute expires, the IRS releases it, or another legal event ends it. IRC §6334(a)(9) exempts a portion of wages based on filing status, pay frequency, and dependents. After receiving Form 668-W, the employer gives the employee a Statement of Dependents and Filing Status, which should generally be returned within three days. If not returned, the employer uses the default treatment. The annual exemption tables appear in IRS Publication 1494. Federal private-creditor garnishment limits do not control IRS levies (see IRM 5.11.5).
A bank levy directs a financial institution to freeze funds belonging to the taxpayer. It generally captures only the money available when the levy is received and does not attach to later deposits — the IRS must issue another levy to reach those. Under IRC §6332(c), the bank holds the captured funds for 21 calendar days before remitting them to the IRS. This window lets the taxpayer resolve IRS error, prove funds belong to another person, demonstrate economic hardship, arrange a resolution, or request a release. The 21 days do NOT extend the CDP deadline — that clock is set by the final levy notice (see IRM 5.11.4).
If a self-employed person or business has customers who owe it money, the IRS may serve a levy on those customers — reaching invoices, contract payments, commissions, consulting fees, rental income, merchant-processing payments, and other amounts owed. A levy generally reaches property or payment rights existing when the levy is served; future payments depend on the contract and whether a fixed right to receive exists. When a taxpayer works as an independent contractor, the payer may receive a levy and must send amounts owed directly to the IRS. The wage exemption under IRC §6334(a)(9) does not automatically protect independent-contractor payments the same way it protects an employee's paycheck.
Through the Federal Payment Levy Program (FPLP), the IRS can continuously levy up to 15% of certain federal payments under IRC §6331(h) — including some Social Security benefits, federal retirement, federal salaries, and federal contractor payments. Supplemental Security Income (SSI) is exempt, and other payments are excluded by law or policy (see IRM 5.11.7). The State Income Tax Levy Program allows the IRS to take a state income-tax refund; under IRC §6330(f) this is one situation where the IRS may proceed without a 30-day pre-levy CDP notice, but a post-levy CDP hearing must be offered. This is different from a federal refund offset, which is not a levy.
The IRS may levy a taxpayer's interest in certain IRAs, qualified plans, and pension benefits. A retirement account is not automatically protected simply because early withdrawal triggers taxes or penalties, but IRS employees must perform additional analysis — including whether the taxpayer engaged in flagrant conduct and whether the funds are needed for necessary living expenses (IRM 5.11.6). Investment accounts (cash, stocks, bonds, mutual funds) and rights to digital assets held through an exchange or custodian can also be reached. Physical seizure of vehicles, equipment, or real estate is less common because of added procedural steps; under IRC §6334(e), the IRS generally needs written judicial approval to seize a principal residence (IRM Part 5.10).
Exempt property may include necessary clothing and schoolbooks; limited amounts of fuel, furniture, personal effects, livestock, and poultry; limited books and tools of a trade; unemployment benefits; certain public-assistance payments; workers' compensation; certain service-connected disability payments; certain pension and annuity payments; court-ordered child-support payments; SSI payments; and a calculated portion of wages and salary. The exemptions are narrower than most taxpayers expect — ordinary checking accounts, vehicles, investment accounts, and many retirement accounts are not automatically protected.
Under IRC §6343, the IRS must generally release a levy when the tax debt is paid, the collection statute has expired, release will facilitate collection, the taxpayer enters an installment agreement that does not permit the levy to continue, the levy creates economic hardship, or the property's value exceeds the amount owed and a partial release will not prevent collection. Economic hardship generally means the levy prevents an individual from paying reasonable basic living expenses; the IRS may require Form 433-F or 433-A plus supporting documents. A release does not erase the underlying debt — the taxpayer still needs a longer-term resolution (installment agreement, currently-not-collectible, offer in compromise, or another remedy).
A taxpayer who receives a Final Notice of Intent to Levy generally has 30 days to request a CDP hearing on Form 12153. During the hearing the taxpayer may challenge collection procedures, propose an installment agreement, request currently-not-collectible status, submit an offer in compromise, request innocent-spouse relief, dispute the underlying liability when legally permitted, or raise another collection alternative. A taxpayer who misses the 30-day window may qualify for an equivalent hearing within one year — but an equivalent hearing generally does not carry the same right to Tax Court review. The Collection Appeals Program (CAP) may also be available for certain levy actions, with different procedures and rights than CDP.
A wage garnishment is one type of IRS levy — a continuous levy on wages under IRC §6331(e). The IRS can also levy bank accounts, receivables, federal payments, retirement accounts, investments, and physical property. All are levies, but each follows different rules.
Generally no. Under IRC §6330, the IRS must send a Final Notice of Intent to Levy and Notice of the Right to a Hearing (Letter 1058, LT11, or CP90) and wait 30 days. Exceptions exist for jeopardy levies, state tax refund levies, certain federal contractor levies, and some employment-tax situations, but a CDP hearing must still be offered — sometimes after the levy.
Yes. Under IRC §6343(a)(1)(D), the IRS must release a levy that is creating an economic hardship — meaning the levy prevents an individual from paying reasonable basic living expenses. Proof usually requires Form 433-F or 433-A with bank statements, pay records, housing, utilities, and medical expenses.
You may still qualify for an equivalent hearing if requested within one year, but an equivalent hearing generally does not preserve the right to Tax Court review. The Collection Appeals Program (CAP) may also be available for specific levy actions, with different rights and procedures than CDP.
Once the IRS has a complete financial picture — usually Form 433-F plus supporting documents — a release can issue in as little as 24 to 72 hours. ACS or the assigned Revenue Officer faxes Form 668-D directly to the employer. Delays usually come from unfiled returns, missing substantiation, or an unassigned case bouncing through ACS queues.
Yes, but only funds on deposit the moment Form 668-A is served. Under IRC §6332(c) the bank freezes those funds for 21 calendar days before remitting them. Deposits made after the levy date are not captured unless the IRS issues another levy. Use the 21-day window to prove hardship, IRS error, or negotiate a resolution.
Entering an installment agreement generally requires the IRS to release future levies, and often the pending one — especially when levy proceeds are needed for the monthly payment. A pending IA request also blocks new levy action under IRC §6331(k) while the request is under consideration and for 30 days after rejection.
Yes. Under the Federal Payment Levy Program (IRC §6331(h)), the IRS can continuously levy up to 15% of certain Social Security benefits, federal pensions, and federal salaries. SSI is exempt. IRAs and qualified retirement accounts are also reachable, but IRS employees must perform a flagrant-conduct and living-expense analysis (IRM 5.11.6) before pulling from them.
The IRS sends notice to the taxpayer — CP504 warns of intent to levy state refunds and levy action, and LT11/Letter 1058/CP90 is the Final Notice of Intent to Levy triggering CDP rights. Third parties (employer, bank, customer) are not notified in advance; they learn when Form 668-W or 668-A arrives. That's why acting on the final notice matters more than waiting for the levy itself.
A licensed tax attorney will pull your IRS transcripts, review your situation, and walk you through the resolution options that fit — no obligation.