Tax Liens, Levies, and Wage Garnishments

A lien is a claim against your property. A levy is the actual taking. People use the words interchangeably, but the difference determines what can be done and how quickly.

Timing dominates this area of practice. A bank levy holds funds for 21 days before the bank remits them to the IRS, and that window is often the entire case. A wage garnishment continues every pay period until it is released. If you have received a levy notice, the useful action is now, not after the money moves.

We handle lien and levy matters against the IRS, the Franchise Tax Board, CDTFA, and the EDD throughout Temecula, Murrieta, San Diego, Riverside, and San Bernardino.

The Federal Tax Lien

A statutory lien arises automatically when tax is assessed, demand is made, and payment is not received. It requires no filing and no court action, and it attaches to all property and rights to property — including assets acquired afterward.

The Notice of Federal Tax Lien is the separate public filing that perfects the government’s priority against other creditors. Its practical effects: title companies will not close a sale without addressing it, lenders decline refinancing, and business borrowing becomes difficult because the lien reaches accounts receivable and inventory. The major consumer credit bureaus no longer report tax liens, but the recorded document is public and underwriters find it.

Four Ways to Address a Lien

Release — the lien is extinguished when the liability is paid, becomes unenforceable, or a bond is accepted. Release should occur within 30 days of satisfaction; verify that it did.

Withdrawal (Form 12277) — removes the public notice while the liability may remain. Available where the filing was premature or procedurally improper, or where withdrawal facilitates collection. It is also available after entering a direct debit installment agreement meeting the program’s conditions, which is one of the more useful and least-known remedies for a taxpayer trying to refinance.

Discharge (Form 14135) — removes the lien from a specific property, typically to permit a sale where the IRS receives its interest in the equity from proceeds.

Subordination (Form 14134) — allows another creditor to move ahead of the IRS, usually so a refinance can close where the new loan will pay the government more than the current position would.

Discharge and subordination are transactional tools with lead times. If a closing date exists, the application should be underway well before it.

Levies

A levy takes property to satisfy the liability. Before most levies, the IRS must issue a Final Notice of Intent to Levy and Notice of Your Right to a Hearing — Letter 1058 or LT11 — and wait 30 days.

Bank levy. A one-time attachment of the balance on the day it is served. The bank holds the funds for 21 days, then remits. Deposits made after service are not captured, so a second levy is required to reach them. The 21-day hold exists specifically so errors and hardship can be raised — that is the window to use.

Wage levy. Continuous. The employer withholds everything above an exempt amount, computed from filing status and dependents, from every paycheck until the IRS releases it. The exempt amount is modest, and this is the enforcement action that most often makes rent impossible to pay.

Other levy targets. Accounts receivable and commissions — devastating for a business, because customers learn of the tax problem. Also retirement accounts, the cash value of life insurance, state tax refunds, and up to 15% of Social Security benefits.

Getting a Levy Released

Under IRC 6343, the IRS must release a levy when the liability is satisfied or unenforceable, when release will facilitate collection, when an installment agreement is in place providing otherwise, when the fair market value exceeds the liability and partial release will not hinder collection, or when the levy creates an economic hardship — an inability to meet basic, reasonable living expenses.

Economic hardship is the ground most often available and most often argued badly. It succeeds on documentation: a completed financial statement, current pay records, and proof of the essential expenses the levy prevents you from paying. It fails when presented as a general statement that the levy is difficult. A hardship release is also usually paired with a proposed alternative — an installment agreement or currently not collectible status — because the IRS is more willing to release when something replaces it. See our tax relief page for those alternatives.

Collection Due Process

Two notices carry the same 30-day right, and both are frequently thrown away:

• Letter 1058 / LT11 — Final Notice of Intent to Levy: 30 days to request a CDP hearing on Form 12153
• Letter 3172 — Notice of Federal Tax Lien filing: 30 days from the fifth business day after filing

A timely request suspends levy action, sends the case to the independent Office of Appeals, permits collection alternatives and — where you never had a prior opportunity — a challenge to the underlying liability, and preserves the right to petition the Tax Court. Filed after the deadline, it becomes an equivalent hearing: the same conversation, without Tax Court review.

Thirty days is short, and the notices look like the several that preceded them. That resemblance is why the deadline gets missed.

California Liens and Levies

California moves faster, and the differences matter.

The FTB issues bank levies without the federal notice sequence. There is no Letter 1058 equivalent and no 30-day CDP right, so a taxpayer who has been watching for a “final notice” can be levied without seeing one. The FTB’s bank levy also reaches funds over a shorter period than the federal 21-day hold.

Wage garnishment is imposed by Earnings Withholding Order for Taxes, served directly on the employer. It can take a substantially larger share of disposable earnings than an ordinary civil judgment garnishment.

State tax liens are recorded at the county level, attaching to California real property. And the FTB can suspend professional and occupational licenses for taxpayers appearing on the state’s largest delinquency lists — a live risk for contractors, real estate licensees, healthcare providers, and others practicing under state license.

The other California fact worth holding onto: R&TC 19255 gives the FTB twenty years to collect, restarting when certain later fees are assessed. Waiting out a state balance is generally not a strategy.

CDTFA and EDD have their own levy authority, and after a business failure all three agencies may enforce simultaneously against the same person. Individuals owing all three can pursue resolution jointly on the multi-agency offer form DE 999CA.

What to Do When a Levy Hits

Immediately: note the date of service — the 21-day clock on a bank levy runs from it. Get the levy notice and the notice history. Confirm whether a Final Notice was issued and when, since a levy without proper notice may be improper. Gather income and expense documentation if hardship applies.

Avoid: moving funds between accounts after service, which does not help and looks worse than it is. Do not assume a payment arrangement automatically releases an existing levy — release generally must be requested. And do not wait for a callback from the general collection line while the 21 days run.

Frequently Asked Questions

How long do I have after a bank levy before the money is gone?

21 days from the date the bank is served. The funds are frozen, not yet remitted, and that period exists so hardship and error can be raised.

Can the IRS levy without warning?

Generally no — a Final Notice of Intent to Levy and 30 days are required. Exceptions exist for jeopardy situations and state tax refunds. The FTB, however, does not follow the federal sequence and can levy without an equivalent final notice.

How much of my paycheck can be garnished?

Federally, everything above an exempt amount based on filing status and dependents — typically leaving far less than a private creditor garnishment would. California’s Earnings Withholding Order for Taxes can also take more than an ordinary judgment garnishment.

Will a payment plan release an existing levy?

Often, but not automatically. Release generally must be requested, and entering an agreement is the most common basis for obtaining one.

Can I get a lien removed without paying in full?

Sometimes. Withdrawal is available after entering a qualifying direct debit installment agreement or where the filing was improper. Discharge and subordination address specific property or specific transactions.

Can the IRS levy my retirement account?

Yes, though it generally does so only after other sources, and typically where there is flagrant neglect. Vested account balances are reachable.

What if the levy was issued in error?

Request release and document the defect — payments not credited, a liability already satisfied, an expired collection statute, or missing notice. Wrongful levy remedies exist for third parties whose property was taken.

Act Within the Window

Lien and levy cases are decided by deadlines that are measured in days: 21 days on a bank levy, 30 days on a Final Notice, and whatever remains before the next payroll date on a wage garnishment. Release is far easier to obtain before the funds move than to reverse afterward.

Pietro Canestrelli holds an LL.M. in Taxation and handles levy release, lien withdrawal, discharge and subordination, CDP hearings, and collection alternatives before the IRS and California’s tax agencies. Schedule a consultation, or read about what happens when you owe back taxes and our offer in compromise practice.