Defending Against IRS Levy and Garnishment Actions

The IRS wields broad administrative powers to collect unpaid federal taxes. Among the most disruptive of these powers are levy and garnishment actions under 26 U.S.C. § 6331. A levy allows the IRS to seize wages, bank accounts, or other property to satisfy a liability. Wage garnishment, a form of levy, can reduce a taxpayer’s income to subsistence levels overnight.

For taxpayers, and their advisors, preventing levy action is often the most urgent task once a liability arises. With careful planning, statutory rights, and prompt use of administrative remedies, many levies can be avoided or released before irreparable harm occurs.

Authority for Levy and Garnishment

Under § 6331(a), if a taxpayer neglects or refuses to pay tax within 10 days after notice and demand, the Secretary may collect the tax by levy upon all property and rights to property belonging to the taxpayer. This includes:

• Wages and salary (continuous wage levy),

• Bank accounts,

• Accounts receivable, and

• Tangible property such as vehicles or real estate.

Levy action is subject to procedural protections, including notice and an opportunity for a hearing.

Notice Requirements

Before a levy may be issued, the IRS must provide:

1. Notice and Demand for Payment (§ 6303).

2. Final Notice of Intent to Levy and Notice of Your Right to a Hearing (§ 6331(d)). This notice must be provided at least 30 days before levy action.

3. The right to request a Collection Due Process (CDP) hearing under § 6330.

Failure to respond within this timeframe often results in enforced collection.

Taxpayer Protections and Exemptions

While the levy power is broad, it is not unlimited. Statutory exemptions under § 6334 include:

• Certain personal effects and household items,

• Unemployment benefits,

• Certain annuity and pension payments,

• Workers’ compensation, and

• A portion of wages (based on IRS exemption tables).

However, these exemptions are narrow, and the practical effect of garnishment is often financially devastating.

Preventing Levy Action

Advisors should act immediately when a Final Notice of Intent to Levy is issued. Key options include:

• Request a CDP Hearing (§ 6330).
  Filing a timely request suspends levy action while the appeal is pending. This is the strongest protection available and often creates negotiating leverage.

• Enter into an Installment Agreement (§ 6159).
  A pending or approved installment agreement generally halts levy activity.

• Submit an Offer in Compromise (§ 7122).
  While pending, levy action is suspended by statute.

• Request Currently Not Collectible (CNC) Status.
  If the taxpayer demonstrates financial hardship, the IRS may suspend collection, including levy.

• Seek Innocent Spouse Relief (§ 6015).
  If applicable, this can remove joint liability exposure and prevent collection against one spouse.

Releasing an Existing Levy

If a levy has already been issued, the IRS must release it under § 6343 when:

• The liability is paid in full,

• The statute of limitations on collection expires (§ 6502),

• Release will facilitate collection,

• An installment agreement is accepted, or

• The levy creates economic hardship (as defined in § 6343(a)(1)(D)).

Practitioners should always document hardship thoroughly and request immediate release where appropriate.

Best Practices for Practitioners

• Act Before the 30-Day Window Closes
  Once the deadline on the Final Notice passes, levy action can occur without further warning.

• File for CDP Rights Early
  This suspends levy action and preserves appellate rights. Missing this deadline limits taxpayers to an “Equivalent Hearing,” which does not suspend enforcement.

• Evaluate All Resolution Options
  Installment agreements, Offers in Compromise, and CNC status all provide statutory protection against levy.

• Document Hardship
  Demonstrating that levy action will prevent payment of basic living expenses can be critical for obtaining release.

• Coordinate with Employers and Banks
  If levy notices have already been issued, proactive communication can buy time while a release is requested.

Common Pitfalls

• Ignoring the Final Notice of Intent to Levy (CP90/CP91/Letter 1058).

• Believing that contacting the IRS informally stops enforcement. Only formal actions (CDP request, IA, OIC, CNC) provide protection.

• Waiting until levy or garnishment has begun, when prevention strategies are still available earlier.

• Failing to monitor deadlines for appeal rights.

Levy Prevention Checklist

Upon Receiving Final Notice of Intent to Levy

• Confirm notice validity (§ 6331(d)).

• File timely CDP request (§ 6330).

• Evaluate installment agreement eligibility (§ 6159).

• Consider Offer in Compromise (§ 7122).

• Assess financial hardship for CNC request.

If Levy Issued

• Request immediate release if hardship exists (§ 6343).

• Confirm compliance with notice requirements.

• Explore IA, OIC, or CNC to secure release.

• Retain proof of communications and submissions.

Bottom Line

IRS levy and garnishment actions are among the most disruptive collection tools, often leaving taxpayers unable to meet basic living expenses. But these actions are not inevitable. With timely use of statutory rights under §§ 6330–6331, and practical tools like installment agreements and hardship relief, practitioners can often prevent enforcement before it begins — or secure rapid release if a levy is already in place.

Proactive, documented intervention is the taxpayer’s best defense against the harsh consequences of enforced collection.