A levy is one method of enforced collection action that the Department of Revenue may use to collect a tax liability that has not been paid voluntarily.
Although court authorization is not needed to issue a levy, there are four legal requirements, which must be met:
- A Notice of Tax Due (a tax bill) must be mailed to the taxpayer.
- The 45-day protest period on the Notice of Tax Due or assessment must have expired.
- The taxpayer must neglect or refuse to pay the tax.
- A Final Notice before Seizure must be served at least 30 days in advance of the levy and may be served in person or sent by certified or registered mail to the taxpayer's last known address.
*Except for levies on wages and salaries, a levy shall extend only to property possessed and obligations existing at the time of the service of the levy.
A levy remains in effect until one of the following occurs:
- The Department of Revenue releases the levy.
- The levy is honored by the person upon whom it was served by paying the tax liability on the levy in full, including all applicable penalty, interest, and fees or the total sum due to the taxpayer whichever is less.
- The Statute of Limitations for enforced collection action has expired.
- The taxpayer enters into an approved payment agreement (unless part of the agreement includes ongoing remittance from a wage levy).
- The fair market value of the property subject to levy exceeds the amount of the levy and releasing part of the seized property will not hinder collection of the tax debt.
Some types of property are exempt from levy and are listed below:
- Property that is exempt from judgment is also exempt from levy
- Child support (court mandated)
- $5,000 of residential property
- Pensions and retirement benefits
- Public assistance
- Worker's Compensation Disability Insurance
To avoid levy action, the taxpayer should make an active effort to satisfy the tax debt through full payment or a formal payment agreement. Once a levy is issued, it is important that the taxpayer immediately contact the assigned Department of Revenue officer to make arrangements to satisfy the debt.
Click here to inquire about a levy
Bank levies attach to a taxpayer's bank account or any other assets held in a financial institution, such as certificates of deposit. Financial institutions receiving such a levy must immediately withhold and remit all funds on deposit to the Department of Revenue. Certain funds are exempt from levy, such as retirement benefits, pensions, and public assistance.
Wage levies attach a taxpayer's non-exempt wages. A wage levy remains in effect until the tax debt is paid in full, the statute of limitations expires, or the Department of Revenue releases the levy. Exemptions for dependants may be deducted from the amount of the remittance(s).
||Third Party Levies
Third Party Levies are issued to a third party, which includes but is not limited to the following:
- Cash value of life insurance
- Licenses or franchises
- Demand notes
- Accounts receivable
- Rental income
- Checking and savings accounts
- Certificates of deposit