Tax Levy Meaning

A tax levy is a legal procedure through which an authority of the government, typically an agency like the IRS (Internal Revenue Service) or a tax agency of the state, takes possession of assets or property to pay the tax debt. If a taxpayer does not pay taxes or is owed tax debt, the government may issue a levy to recover the amount due.

This may involve garnishing wages, taking money directly from the bank account, taking the property (such as a car and real property), and taking other assets.

Here’s how it typically works:

Notification: Taxing authorities have to send an official notice to the taxpayer informing him of the amount due and the intention to levy the debt if it isn’t paid.
Response Time: Permits the taxpayer to typically be given a timeframe (normally 30 days) to settle the debt or arrange arrangements, such as creating a payment plan or contesting the tax.
The Levy Act: If the taxpayer fails to pay or settle the amount owed, the authority has the right to begin the levy process by seizing assets to pay the amount due.

A tax levy is distinct from a lien, which is a legal right on property for unpaid taxes, but is not a direct seizure. The lien serves more as a warning; however, a levy can be the option taken when the debt is not resolved.

Why is There a Tax Levy On My Paycheck?

A levy of tax on your wages is a sign that the IRS or a state tax agency has taken steps to collect taxes that have not been paid by securing your wages. It usually happens when you are owed a tax debt that hasn’t yet been resolved or paid despite previous notices.

The tax levy will be in effect till the tax debt has been settled or if you enter into other arrangements with the tax authorities.

What is the State Tax Levy on a Paycheck?

A tax levy from the state on your paycheck is when a tax authority from the state is able to garnish a portion of your earnings to collect state taxes that have not been paid. It happens when you are owed a state tax debt that isn’t resolved after receiving notifications from the government.

The levy is in effect until the debt is fully paid or you agree to an alternative payment arrangement with the government.

What is Tax Levy Garnishment?

Tax levy garnishment is a legal procedure in which an authority of the government, such as the IRS or a state tax agency, is able to withhold a portion of your income or assets to cover tax debts that are not paid. This is done when you have not been able to settle or pay your tax owed despite receiving notices.

The garnishment will continue until the tax debt is fully paid or a new arrangement is reached.

Also See: Retro Pay