What Can the IRS Levy?

What Can the IRS Levy?

The IRS can levy almost any asset or income source you hold to collect a tax debt. This legal seizure is a powerful collection tool the agency uses after notices and ignored requests for payment. Understanding what can be levied helps taxpayers know their exposure and the urgency of resolving a balance.

Types of Income Subject to a Levy

• Wages and Salaries: The IRS can garnish a significant portion of your paycheck through your employer until the debt is satisfied.
• Social Security Benefits: Benefits can be levied, though there is a protected portion for certain amounts.
• Rental Income and Dividends: Payments you receive from properties or investments are fair game.
• Commissions and Bonuses: These supplemental income streams are not exempt.
• Licenses and Contracts: The agency can seize professional licenses or cancel government contracts.

Bank Accounts and Financial Assets

A bank levy freezes and then seizes funds in your checking, savings, and money market accounts. The IRS can also go after the cash value of life insurance policies and accounts receivable you are owed. Investment accounts, retirement funds, and even the proceeds from a sale of property can be levied if the debt remains unpaid.

Physical Property and Real Estate

While less common than wage or bank levies, the IRS can seize and sell physical property. This includes vehicles, boats, jewelry, and real estate. In many cases, the agency will file a federal tax lien first, which gives it a legal claim against the property, and then proceed with a levy and forced sale if the debt persists.

Exempt Property and Limits

Certain items are exempt from levy, such as basic personal clothing, household goods up to a specific value, and tools of the trade needed for work. Unemployment benefits and certain public assistance payments also have protections. However, the IRS has broad discretion, and the definition of 'necessary' can be narrow. Working with a tax professional to request a Collection Due Process hearing is often the most effective way to stop a levy and negotiate a resolution.