When taxpayers fall behind on filing or paying their federal taxes, the IRS has powerful tools it can use to collect what’s owed. Two of the most disruptive are wage garnishments and bank levies. These actions can begin only after the IRS sends a series of notices — but once they’re in place, they can create immediate financial strain.
Understanding the difference between a garnishment and a levy, knowing which notices to watch for, and taking action early can prevent serious damage. Here’s what you need to know and how to stop these actions before they start.
What Triggers IRS Collection Actions?
Before the IRS can take wages or seize money from a bank account, it must follow a specific process. Taxpayers receive multiple notices warning that collection activity is coming. The most important notices to watch for include:
CP504 — Notice of Intent to Levy
This is the IRS’s first major warning. It states that the IRS intends to levy certain assets, usually starting with state tax refunds.
Letter 11 or Letter 1058 — Final Notice of Intent to Levy
This is the final legal requirement before the IRS can seize assets or garnish wages. Once this letter is issued, the IRS can begin enforcement 30 days later unless the taxpayer acts.
Ignoring this letter is the most common mistake taxpayers make. Once the deadline passes, the IRS does not need additional permission to start taking your money.
What Is a Wage Garnishment?
A wage garnishment is when the IRS contacts your employer and requires them to withhold a portion of your paycheck and send it directly to the government.
How It Works
- Employers must comply by law
- Garnishments continue until the balance is paid or the IRS agrees to release the order
- The amount taken depends on your filing status, pay frequency, and number of dependents
Unlike private creditors, the IRS has the authority to garnish a much larger portion of your income. Many taxpayers are left with just enough to cover basic living expenses, if that.
Why It’s Disruptive
Garnishments continue automatically, and many taxpayers feel embarrassed or stressed knowing their employer has been notified. The financial impact can be severe, especially if the garnishment hits without warning.
What Is a Bank Levy?
A bank levy allows the IRS to legally seize funds directly from your bank account.
The 21-Day Rule
When the IRS issues a bank levy:
- Your bank must freeze the funds in your account immediately
- The freeze lasts 21 days
- After 21 days, the bank is required to send the frozen money to the IRS
The freeze applies only to the amount available at the time of the levy. Future deposits are not automatically taken — but the IRS can issue additional levies if the debt remains unpaid.
Why It’s Serious
Many taxpayers discover the levy only after their debit card is declined or their automatic payments fail. For individuals or families already under financial pressure, a levy can create immediate hardship.
Why These Actions Happen
The IRS uses garnishments and levies only after repeated warning letters. They are typically triggered when:
- Returns are unfiled
- A taxpayer ignores notices
- A taxpayer doesn’t respond to a proposed payment plan
- The IRS believes enforced collection is the only remaining path
The good news: both wage garnishments and bank levies can be stopped — and in many cases, released — if the taxpayer takes fast, appropriate action.
How to Stop Wage Garnishments and Bank Levies
There are three primary resolution options that can halt or reverse IRS collection actions. The right one depends on your financial situation.
1. Installment Agreement (IA)
If you can afford monthly payments, an Installment Agreement is often the fastest way to get a levy or garnishment released.
Benefits:
- Stops enforced collection once approved
- Provides predictable monthly payments
- Avoids the need for appeals or additional documentation in simpler cases
A correctly structured agreement can protect your income while satisfying the IRS.
2. Offer in Compromise (OIC)
If you cannot pay the full amount, an OIC may allow you to settle the entire debt for less than you owe.
Benefits:
- Resolves the full liability at a reduced amount
- Provides a permanent solution rather than temporary relief
- Stops all collection activity once the IRS accepts the offer
OICs require detailed financial analysis and documentation. Submitting one without professional guidance often leads to rejection — and can even delay relief.
3. Currently Not Collectible (CNC)
If your income does not cover basic living expenses, you may qualify for CNC status.
Benefits:
- The IRS pauses all collection
- No monthly payments required
- Ideal for taxpayers in temporary or long-term financial hardship
CNC status does not eliminate the debt, but it protects your income and assets while you regain stability.
Why Time Matters
Once a levy or garnishment begins, every day counts. The longer you wait, the more difficult it becomes to stop the action — especially if the IRS views non-response as unwillingness to cooperate.
Acting quickly gives you access to the widest range of options, including appeal rights that may expire once deadlines pass.
Why Professional Intervention Makes a Difference
Releasing a garnishment or levy often requires:
- Form 433-A or 433-F financial analysis
- Negotiation with the IRS
- Understanding collection timelines
- Establishing compliance with all tax filings
- Knowing the fastest available pathway to relief
A CPA experienced in IRS collections can determine which solution fits your situation and communicate directly with the IRS to secure the quickest possible release.
Take Action Before the IRS Takes Your Money
If you’ve received a CP504, Letter 11, or Letter 1058 — or if a levy or garnishment has already started — do not wait. These problems get more difficult and more expensive the longer they continue.
Contact Duffy Tax Resolution immediately for guidance and relief.
Contact Duffy Tax Resolution
Kevin G. Duffy, CPA/CFF, CFP
Duffy Tax Resolution
526 Bay Ave., 2nd Floor
Point Pleasant, NJ 08742
(908) 565-1285
Serving New Jersey and New York City
