Representation before the IRS · Representing a taxpayer in the collection process

Levy and seizure of taxpayer's property

A levy is not a lawsuit. It is an administrative seizure the IRS performs on its own authority, and the taxpayer’s protection lies almost entirely in the notices that must precede it and in the grounds that require its release. Representation in this area is mostly a matter of knowing which clock is running and which statutory ground fits the client’s facts.

The rule

The authority. If a person liable for tax neglects or refuses to pay within 10 days after notice and demand, unless collection is in jeopardy^TY2026, the Secretary may collect by levy upon all property and rights to property except property exempt under § 6334, belonging to that person or subject to the lien (IRC § 6331(a)). “Levy” includes the power of distraint and seizure by any means, and a levy extends only to property possessed and obligations existing at the time — with the exception in § 6331(e) (IRC § 6331(b)).

The notice before levy. Levy on salary, wages or other property may be made only after the IRS notifies the person in writing of its intention. That notice must be no less than 30 days before the levy, given in person, left at the dwelling or usual place of business, or sent by certified or registered mail to the last known address^TY2026, and must set out in simple, nontechnical terms the levy and sale provisions, the applicable procedures, the administrative appeals available, the alternatives that could prevent levy, including installment agreements, and the redemption and lien release provisions (IRC § 6331(d)(1), (2), (4)). Jeopardy dispenses with it (IRC § 6331(d)(3)).

Two notices, not one. Section 6331(d) is the notice of intent to levy. Section 6330 separately requires notice of the right to a collection due process hearing before levy, and the CDP right is what preserves Tax Court review. The § 6331(d) notice alone does not open that door.

Continuous levies. A levy on salary or wages is continuous from the date first made until released under § 6343 (IRC § 6331(e)) — unlike an ordinary levy, which reaches only what exists at the moment of service. A separately approved continuing levy on specified federal payments reaches up to 15% of a specified federal payment, continuous until released^TY2026, notwithstanding § 6334 (IRC § 6331(h)).

What is exempt (IRC § 6334(a)): necessary wearing apparel and school books; $11,980 of fuel, provisions, furniture, household personal effects, arms for personal use, livestock and poultry^TY2026; $5,990 of books and tools necessary for the taxpayer's trade, business or profession^TY2026; unemployment benefits; undelivered mail; certain annuity and pension payments; workers’ compensation; income needed to satisfy a pre-levy court judgment for support of minor children; a minimum weekly amount of wages, salary and other income; and any residence where the amount of the levy does not exceed $5,000^TY2026. A principal residence is exempt unless a judge or magistrate of a United States district court approves the levy in writing — a jurisdiction that is exclusive to those courts (IRC § 6334(a)(13)(B), (e)(1)). Business assets need personal written approval by a district director or assistant district director, who may approve only on determining that the taxpayer’s other assets are insufficient — or a jeopardy finding (IRC § 6334(e)(2)).

Two more limits. No levy where the estimated expenses of levy and sale exceed the property’s fair market value (IRC § 6331(f)); and no levy on a day the taxpayer must appear in response to a collection summons, absent jeopardy (IRC § 6331(g)).

What suspends levy entirely. No levy while an offer in compromise is pending, for 30 days after rejection, and during any appeal filed in those 30 days; and no levy while an installment agreement request is pending, for 30 days after rejection, while an agreement is in effect, and for 30 days after termination plus any appeal (IRC § 6331(k)(1), (2)).

After seizure. Written notice of seizure goes to the owner as soon as practicable, specifying the sum demanded and describing the property; notice of sale follows, published or posted (IRC § 6335(a), (b)). The owner may pay the amount due plus expenses at any time before sale and have the property restored (IRC § 6337(a)). Real property sold may be redeemed within 180 days after the sale, on payment of the purchase price plus interest at 20% per annum^TY2026 (IRC § 6337(b)).

Release. The Secretary shall release a levy where the liability is satisfied or becomes unenforceable by lapse of time; where release will facilitate collection; where the taxpayer has entered a § 6159 installment agreement, unless the agreement provides otherwise; where the levy is creating an economic hardship given the taxpayer’s financial condition; or where the property’s value exceeds the liability and partial release would not hinder collection (IRC § 6343(a)(1)). Tangible personal property essential to the taxpayer’s trade or business gets an expedited determination (IRC § 6343(a)(2)).

Current figures

How it works in practice

The five grounds in § 6343(a)(1) are the working tools, and economic hardship is the one that resolves most wage levies. It is a statutory ground, not a concession, and it turns on the taxpayer’s financial condition rather than on the merits of the tax. So does the installment agreement ground: entering an agreement obliges release unless the agreement says otherwise or release would jeopardise the government’s secured creditor status.

Section 6331(k) is the shield, and its edges are what matter. A pending offer or installment agreement request stops levy, and so do the thirty days after a rejection and any appeal filed within them. That means a client whose request has just been rejected still has protection — but only if the appeal goes in inside thirty days. Missing that window converts a protected position into an exposed one overnight.

The continuous nature of a wage levy is the single most consequential difference from an ordinary levy. A bank levy reaches the balance at the moment of service and nothing after; a wage levy keeps reaching every pay period until it is released. Clients routinely assume the first is the model for the second and wait for a levy to expire that never will.

The principal residence protection is stronger than practitioners expect. Only a federal district court judge or magistrate can authorise that levy, and the district courts have exclusive jurisdiction. Business property is a lower bar — personal written approval by a district or assistant district director, on a finding that other assets are insufficient — but it is still an approval requirement, not a formality.

How this has changed

The levy provisions were reshaped by the Restructuring and Reform Act of 1998, which added the § 6330 CDP right before levy, the § 6331(k) suspensions during pending offers and installment agreements, and the economic hardship release ground now in § 6343(a)(1)(D). The 1998 Act also created the approval requirements in § 6334(e) — the district court order for a principal residence and the personal official approval for business assets — which had not previously existed. The exemption amounts in § 6334(a)(2) and (a)(3) have been indexed since 1999 under § 6334(g), rounded to the nearest ten dollars, so the current figures bear no resemblance to the statutory text and must be taken from the year’s revenue procedure.

Exam focus

Distinguish the § 6331(d) notice of intent from the § 6330 CDP notice, and know the 30-day period attached to each. Know that a wage levy is continuous and an ordinary levy is not. Learn the § 6334(a) exempt categories, and in particular the principal residence rule and who must approve. Know all five § 6343(a)(1) release grounds. Know the § 6331(k) suspensions and that the protection extends 30 days past a rejection and through a timely appeal. Expect the 180-day redemption period and the uneconomical levy rule as discrete facts.

Check yourself

1. A levy on a taxpayer’s wages: (A) Reaches only wages payable at the moment of service (B) Is continuous from the date first made until released under § 6343 (C) Must be re-served each pay period (D) Expires after 30 days Answer: B. IRC § 6331(e).

2. The IRS wishes to levy on a taxpayer’s principal residence. It requires: (A) Approval by a revenue officer’s group manager (B) Written approval by a judge or magistrate of a United States district court (C) Written approval by a district director (D) No approval; residences are not exempt Answer: B. IRC § 6334(e)(1); the district courts have exclusive jurisdiction.

3. An installment agreement request is rejected on 1 March and no appeal is filed. Levy becomes permissible: (A) Immediately on rejection (B) After 31 March (C) After a further CDP hearing (D) Never, while the taxpayer intends to reapply Answer: B. IRC § 6331(k)(2)(B) protects the 30 days after rejection, and any appeal filed within them.

4. Which is a statutory ground requiring release of a levy? (A) The taxpayer disputes the underlying tax (B) The levy is creating an economic hardship due to the taxpayer’s financial condition (C) The taxpayer has requested an audit reconsideration (D) The taxpayer has moved Answer: B. IRC § 6343(a)(1)(D).

5. Real property sold at a levy sale may be redeemed: (A) Never (B) Within 180 days of the sale, on payment of the purchase price plus 20 percent interest per annum (C) Within 30 days, at the purchase price (D) Within one year, at fair market value Answer: B. IRC § 6337(b).