The Federal Tax Lien (“FTL”) is not self-executing — meaning that the FTL encumbers a taxpayer’s property but it does not collect the delinquent taxes. To enforce the collection of delinquent taxes, the Internal Revenue Service (“IRS”) utilizes the Federal Tax Levy (“Levy”), as an administrative collection tool, by which to take custody of the taxpayer’s property in order to satisfy any delinquent taxes.
With the Levy, the IRS can seize all of the interest that a taxpayer has in the property or rights to property. With the Levy, the IRS can attach property held by third (3rd) parties or the taxpayer. The Levy is used to take a taxpayer’s bank accounts, wages, other income, or accounts receivables. A seizure is used to take property in the taxpayer’s possession — motor vehicle, house, or business assets. There is no legal distinction between the Levy and a seizure.
If a taxpayer does not pay the delinquent taxes within the ten (10) day period following the notice and demand for payment, then the IRS has the authority to Levy on such taxpayer’s salary, wages, or other property thirty (30) days after serving a notice of intention to levy.
Some property is exempt from the Levy: (i) a limited amount of personal belongings; (ii) necessary business or professional books and tools; (iii) unemployment compensation; (iv) worker’s compensation; (v) certain welfare benefits; (vi) certain pension benefits; (vii) court ordered child support payments; (viii) undelivered mail; (ix) certain types of military service disability payments; and (x) a very small portion of wages. The IRS must obtain Court approval to seize a taxpayer’s personal residence.
Internal Revenue Code §6331
Internal Revenue Code §6330
Internal Revenue Code §6334
Treasury Regulation §301.6334-1(a)