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What is an IRS Wage Levy?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 19 June 2018
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An Internal Revenue Service (IRS) wage levy is a seizure of assets in the form of wages to satisfy tax debt. The IRS is legally entitled to seize a variety of assets if a taxpayer is deemed delinquent, and the seizures will not be lifted until the tax debt is satisfied or an agreement has been worked out. People can reduce their risks of being exposed to a seizure by paying taxes in a timely fashion or immediately getting in contact with the IRS to make a payment plan if they cannot pay their taxes. All notices from the IRS should be carefully read and responded to.

Before the government is allowed to use an IRS wage levy, several things must happen. The first is assessment, showing that someone does in fact owe taxes, and a delivery of the assessment to the taxpayer with information about how to pay the taxes. If the taxpayer fails to respond, the IRS can start to issue warning notices, including a warning that the taxpayer is subject to a levy. Continued failure to respond can result in an IRS wage levy.

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With a wage levy, the IRS is allowed to take funds directly out of someone's paycheck, before the paycheck is released to the employee. This practice is also known as garnishing. Employers are required to comply with the levy, and if the employee uses direct deposit, the bank can also be involved in seizing funds. If the taxpayer makes good on the tax debt, the levy will be lifted. Likewise if the level expires or is released by a representative of the IRS.

It is important to avoid confusing an IRS wage levy with a lien. A lien is an indicator that someone has claim on a property, but does not hold the title; the IRS may place a lien on a home, for example, making it impossible for the titleholder to sell the home. In a levy, the property is seized. In addition to placing levies on wages, the IRS can also seize assets in bank accounts, real property, and personal property.

Processing an IRS wage levy takes time and requires substantial paperwork. Tax representatives are often eager to avoid a levy if they can, and any show of good will on the part of a taxpayer can prevent a levy from being put in place. Asking for a payment plan, developing a strategy for getting current on tax debt, or showing clear proof that an assessment was in error can all help people avoid an IRS wage levy.

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