IRS Payment Plans and Installment Agreements
From Tax Guide.
Tax Guide · Arab, Alabama
IRS Levy and Wage Garnishment: What It Is and What You Can Do
An IRS levy can take money from a bank account or paycheck. Learn how levies and wage garnishment work, what a CP504 means, and what to do now.
The short answer
What is an IRS levy?
An IRS levy is the legal seizure of your property, such as money in a bank account or part of your wages, to pay a tax debt.
A levy is not the same as a lien. A lien is a legal claim against your property, while a levy actually takes it. The IRS generally sends several notices and gives you a chance to respond before it levies, so a levy is rarely the first thing you hear.
If you have received a notice that mentions a levy, do not ignore it, keep a copy, and call our office. There are often options, and they are usually easier to use before the levy begins than after.
What can be taken
What can the IRS levy?
The IRS can levy several kinds of property, including wages, bank accounts, and in some cases other income and assets.
The most common are wages and bank accounts, because they are easy to reach. A wage levy is often called garnishment. Once a levy is placed on your paycheck, your employer sends part of it to the IRS until the levy is released.
A bank levy usually freezes funds for a short period before they are sent, which gives you a narrow window to act. Other property, such as accounts receivable, some payments and certain assets, may also be reached.
- Wages and salary (wage garnishment).
- Money in bank accounts.
- Payments owed to you by customers, if you are self-employed.
- Some government payments, in certain cases.
- Other property, after further steps and notices.
The warning signs
What does a CP504 or other IRS levy notice mean?
A CP504 is a notice that the IRS intends to levy certain property, and it is a serious warning to act.
The IRS sends a series of notices for an unpaid balance. The early ones bill you and remind you. Later ones, such as the CP504 and a final notice of intent to levy, tell you a levy may follow. The final notice generally carries the right to a hearing if you request it in time.
The response deadline on each notice matters a great deal, and missing it can cost you rights. Read what to do when you receive an IRS notice for the general steps. Also note that the IRS does not demand payment over the phone with gift cards, so a call like that is likely a scam.
Your options
How can I stop or avoid an IRS levy?
The steps that may prevent or end a levy include paying the balance, setting up a payment plan, or showing that the levy causes serious hardship, and the right one depends on your facts.
No one can promise to stop a levy. What can be done depends on the notice, the balance and your finances. The choices below are common ones.
| Option | What it does | Learn more |
|---|---|---|
| Pay in full | Resolves the balance and stops collection | Contact the IRS for a payoff amount |
| Payment plan | Sets a monthly arrangement that may stop enforced collection | IRS payment plans |
| Offer in compromise | Requests a settlement for less in limited cases | Offer in compromise explained |
| Hardship request | Asks the IRS to release or pause a levy if it prevents basic living expenses | Discuss with a representative |
| Hearing or appeal | Lets you present your case if you respond on time | Deadline is on the notice |
| Correct an error | Fixes the debt if it was wrong or already paid | Send proof to the IRS |
If a levy has already begun, the IRS can release it under some conditions. Ask about a release of levy right away.
Getting ahead of it
What should I do right now if I am facing wage garnishment?
Act quickly: gather your notices, note every deadline, and get help before the next step happens.
Look at the most recent IRS letter and write down the date, the tax years and the amount. Bring all your IRS mail, your recent returns and proof of income and expenses. If your employer has already received a levy notice, tell us so we can address it directly.
A payment arrangement may end a levy or prevent one; see IRS payment plans. If penalties add a lot to the balance, see penalty relief and abatement. For the broader picture, our guide to tax debt help in Alabama covers state and federal debts. If the IRS also filed a lien, read federal tax liens.
Protecting yourself
How can I prevent a levy before it starts?
The strongest protection is early action: respond to every notice, file every return and contact the IRS about a plan before enforcement begins.
Most levies follow months of notices. People who respond at the first notice often have more choices than those who wait for the final one. If you cannot pay, say so and ask what arrangements are available.
Staying current going forward also matters. Filing on time and paying new taxes, through withholding or estimates, keeps a small problem from growing. See how to adjust your withholding if you owe each year.
- Open and read every IRS letter the day it arrives.
- File all required returns, even if you cannot pay.
- Contact the IRS or a representative before the deadline.
- Keep proof of every call, letter and payment.
How we can help
Facing a levy? Let us review your notice.
Melton Tax Services can help through our tax representation service.
We can review the notice, explain the options and respond to the agency on your behalf. Do not ignore a levy notice: keep a copy and call us as soon as you can.
We serve Arab and the surrounding area. Call 256-586-4635 or use the contact page. Please bring notices and records to the office rather than sending them through the website.
Answers
Questions about irs levy and garnishment
Can the IRS take my entire paycheck?
The law protects a portion of wages from a levy, and the amount depends on your filing status and dependents. The IRS does not take everything, but a levy can still be a heavy burden.
Will the IRS warn me before a levy?
Generally yes. The IRS sends a series of notices, including a final notice that carries hearing rights, before most levies. Not every case follows the same path, so read every letter.
What is the difference between a levy and a lien?
A lien is a legal claim against your property to secure the debt. A levy is the actual seizure of property or money. A lien often comes first.
Can a levy be released?
Sometimes. Paying the debt, setting up an arrangement or showing hardship can lead to a release, depending on the facts. Ask about it as soon as a levy begins.
Can Alabama garnish wages too?
The Alabama Department of Revenue has its own collection rules for state debts. Do not assume the state and IRS work the same way; we can look at your notice.
Should I move my money to avoid a levy?
No. Moving funds to avoid collection can create bigger problems. Talk with us about lawful options instead.
Does the IRS levy Social Security benefits?
Some federal payments can be reached by a levy under certain programs. The rules are specific, so bring the notice and we can look at it.
What if my employer receives a levy notice?
The employer is required to follow it. Contact us right away so we can talk with the IRS about a release or an arrangement.
Read next
Related reading
Federal Tax Liens: What They Are and What To Do
From Tax Guide.
Tax Debt Help in Alabama: Options for Back Taxes
From Tax Guide.
Tax Representation
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