IRS Levies: What You Need to Know If You Have a Business or Income in the United States

When you operate a business in the United States or generate income subject to federal taxation, it is essential to understand what happens if the IRS determines that you have an outstanding tax debt. One of the strongest enforcement tools the tax authority can use is a levy, which consists of the legal seizure of your property or funds to satisfy what you owe.

Although this situation often generates concern, knowing how the process works, what you can do to avoid it, and what rights you have allows you to handle any IRS notice with greater confidence.

A levy is not the same as a lien. While a lien is a legal claim on your property, a levy involves the actual taking of your assets or income. When the IRS reaches this point, it means that previous notices, payment opportunities, and communication steps did not lead to a resolution. Understanding this dynamic is key to acting quickly and avoiding more serious consequences for your personal finances or your business.

What Is an IRS Levy?

An IRS levy is the action through which the tax authority seizes your property or funds in order to recover unpaid tax debt. This measure can be applied to different types of assets, including:

• Wages and salaries
• Money in bank accounts
• Payments pending from clients or third parties
• Vehicles, real estate, and other personal property
• Any other asset that can be converted into money

Before the IRS can perform a levy, it must send you several notices, including one very specific one: the Final Notice of Intent to Levy and Notice of Your Right to a Hearing. Receiving this notice means you are at the final stage before the IRS takes direct action on your assets.

If you receive this notice, the most important thing is to contact the IRS immediately and seek a formal solution, such as a payment plan, a temporary agreement, or a review of your case. Ignoring it only accelerates the levy process.
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How the Levy Process Works

The IRS follows a structured process before seizing any property. In general, the steps are:

1. Debt Notification
   The IRS informs you that there is an outstanding amount and requests payment.
2. Additional Notices
   If there is no response, the IRS sends reminders and formal notices.
3. Final Notice of Intent to Levy
   This is the critical stage. You have the right to request a hearing with the Office of Appeals.
4. Levy Execution
   If you do not respond or fail to reach an agreement, the IRS proceeds to confiscate property, funds, or income.

This process applies to individuals as well as businesses, including LLCs, corporations, and even companies managed from abroad that operate in the United States.

Types of IRS Levies and How They Affect You

Wage Garnishment

The IRS can order your employer to withhold a portion of your wages. Unlike other forms of garnishment, IRS wage levies do not follow a fixed limit; they are calculated using internal IRS tables that leave only the amount considered essential for your subsistence.

Bank Levy

The IRS can order your bank to freeze the funds in your account. After 21 days, if you take no action, the money is sent to the IRS.

This waiting period exists so you can seek help, argue an error, or set up a payment arrangement.

Property Levy

If the debt is high and the taxpayer does not cooperate, the IRS can levy and sell vehicles, property, or business assets.

Third-Party Levy

The IRS can require clients, suppliers, or financial institutions to send pending payments directly to the tax authority.

How to Avoid an IRS Levy

Avoiding a levy is possible even if you have already received notices. The key is to act fast:

1. Contact the IRS Before the Deadline
   The IRS is always willing to negotiate as long as you show willingness to comply.
2. Set Up a Payment Plan
   If you cannot pay the full amount, you can request:
   • An installment payment plan
   • An Offer in Compromise (if eligible)
   • A temporary hardship extension
3. Request a Hearing
   This allows you to challenge the amount, process, or validity of the debt. It is a legal right and can stop a levy while your case is reviewed.
4. Correct Errors
   Sometimes levies occur due to administrative mistakes, unprocessed returns, or payments not applied correctly. The IRS can stop the process if you prove what happened.
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How to Request the Release of a Levy

Once a levy has been executed, its release depends on several factors. The IRS may lift it if you:

• Pay the debt or reach a payment agreement
• Demonstrate immediate economic hardship
• Submit a late return that changes the amount owed
• Prove you are a victim of an error
• Show that the levy prevents you from meeting other tax obligations

In bank levies, acting within the 21-day period can still help you avoid losing the frozen funds.

Difference Between a Levy and a Lien

These two terms are often confused but represent different actions:

• Lien: A legal claim by the IRS on your property. It does not take the property but limits your ability to sell or transfer it.
• Levy: Direct seizure of money or property to pay the debt.

A lien can exist without a levy, but a levy almost always implies there was already a lien.

Wage Levies in the United States

Wage levies can arise for different reasons (child support, student loans, consumer debt). A court orders the employer to withhold a percentage of wages.

The IRS wage levy works similarly but has specific characteristics:

• No standard 25% cap applies
• It uses IRS internal tables
• It continues until the debt is paid or an agreement is reached

If you have a business in the U.S. or employ staff, it is important to understand these rules to properly handle any levy order.

What to Do If a Levy Affects Your Business

If you operate an LLC, a corporation, or any business in the U.S., a levy can disrupt operations, especially if it affects accounts or income.

You should:

• Determine whether the debt belongs to the business or the owner
• Verify that your corporate structure is correctly set up
• Ensure tax records are up to date
• Apply for a payment agreement that frees essential funds

Many foreign entrepreneurs face problems because they do not fully understand IRS procedures. Having clarity on these obligations is fundamental to operating safely in the U.S.
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Frequently Asked Questions About IRS Levies

1. How long does it take for a levy to be executed after the final notice?
   The IRS must wait 30 days. You can request a hearing or negotiate during this period.
2. Can I stop a levy if I have no money?
   Yes. If you prove immediate financial hardship, the IRS can temporarily suspend it while you set up a plan.
3. What if the IRS freezes my bank account by mistake?
   You can request release by proving the error. The bank will not send funds before 21 days.
4. Does a levy affect my business if I operate from abroad?
   Yes, if your business is registered in the U.S. or generates federally taxable income.
5. Does ignoring notices make the levy go away?
   No. Ignoring them only makes the situation worse.

With Openbiz You Can Avoid Problems With the IRS

Complying with your tax obligations in the United States is essential to protect your assets, your business, and your peace of mind.

If you want to operate legally, avoid levies, or correctly structure your business to prevent risks, at Openbiz we support you through the entire process — from creating your company to managing all the administrative and tax requirements needed to stay compliant.

If you want to operate safely, grow without obstacles, and avoid problems with the IRS, contact us at Openbiz. We’re ready to help you do it right from day one.

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