What Is An IRS Levy?

Do You Know What An IRS Levy Is?

If you are selling a home and have had past IRS tax issues that may be unresolved, you should know what a levy is.

A IRS levy is a legal seizure of your property to satisfy a tax debt. It differs from a lien which is a legal claim against your property to secure payment for a tax debt, a levy will actually take your property.

The IRS will only issue a levy to taxpayers who do not pay their taxes or make arrangements to pay their taxes. Normally the IRS will levy your property only after these three conditions are met:

• The IRS assessed the tax and sent you a Notice and Demand for Payment (a tax bill);
• You neglected or refused to pay the tax; and
• The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy. The IRS may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested. Please note: if the IRS levies your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy.

How Could A Levy Impact My Home Sale

The IRS has asked all depositories (Banks, credit unions, escrow companies and similar institutions) to review and understand their responsibilities, and to process the levy immediately upon receipt from the IRS. Your escrow company will run a search to see if there are any pending transactions where the taxpayer, in this case you, will be receiving any payments. If the answer is yes, the IRS will be expecting to be paid before any money is distributed to you, the seller of the home. This should not be a surprise as the IRS notifies all taxpayers of any impending levy.

What You Should Do

Contacting the IRS to resolve your tax liability is always a good idea, and you are always entitled to hire counsel to help you navigate the process. If the levy causes an economic hardship you can request the levy be released. You also have the right to appeal the levy the IRS places on your wages, bank accounts and other property. More information is always available at http://www.irs.gov. Just do a site wide search for “IRS LEVY”

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