Nobody wakes up to a wage levy out of nowhere, even if it feels that way. The Internal Revenue Code requires a series of steps before the IRS can take your pay. Each step is a notice. Each notice is a chance to stop the process before it reaches your employer.
Most people who end up levied did get the notices. They just did not know what they meant. Here is what they mean.
Step 1: The tax is assessed
A levy collects an assessed tax. Assessment is the IRS formally recording the liability on its books. It happens in a few common ways:
- You file a return and do not pay. The tax shown on your return is assessed.
- An audit or document-matching adjustment. For income tax deficiencies, the IRS generally must first send a notice of deficiency. Under IRC 6213(a), you then have 90 days (150 days if the notice is addressed to a person outside the United States) to petition the Tax Court, and assessment and levy are barred during that period, and while a timely Tax Court case is pending.
- You did not file, and the IRS prepared a return for you. Those cases also run through deficiency procedures before assessment. See unfiled returns and wage levies.
Assessment matters for another reason: it starts the collection clock. IRC 6502 generally gives the IRS 10 years after assessment to collect by levy. See wage levies and the collection statute.
Step 2: Notice and demand
IRC 6303(a) requires the IRS, as soon as practicable and within 60 days after assessment, to give notice to each person liable, stating the amount and demanding payment. For individuals, that is usually the first balance-due notice. The IRS describes its CP14 notice simply: it is sent because you owe money on unpaid taxes.
Two legal consequences follow from notice and demand. First, under IRC 6321, if you neglect or refuse to pay after demand, a federal tax lien arises on all your property. Second, under IRC 6331(a), the IRS may levy if you neglect or refuse to pay within 10 days after notice and demand. The 10 days is not the end of the protection, though. The next two notices are required before a levy on your wages.
Step 3: Notice of intent to levy, 30 days
IRC 6331(d) says the IRS may levy on salary, wages or other property only after notifying you in writing of its intention to levy, at least 30 days before the levy. The notice must be given in person, left at your home or business, or sent by certified or registered mail to your last known address.
For many individuals, this is the CP504. The IRS describes the CP504 as your Notice of Intent to Levy as required by IRC 6331(d), and says the IRS can levy income and bank accounts and seize property. IRM 5.11.1 likewise identifies the CP504 as the IRC 6331(d) notice and says that if it was not issued, the CDP notice (Letter 1058) can satisfy the requirement.
Step 4: Notice of your right to a hearing, 30 days
IRC 6330(a) adds a separate requirement. No levy may be made unless the IRS has notified you in writing of your right to a Collection Due Process hearing, at least 30 days before the first levy for that tax period. This notice is required only once for each tax period.
For most people the CDP notice arrives as an LT11 from the Automated Collection System or a Letter 1058 from a revenue officer. IRM 5.11.1 refers to both. This is the most important notice in the sequence. If you request a hearing in writing within the 30 days, IRC 6330(e)(1) suspends levy action for the periods covered while the hearing and any appeals are pending. See the CDP hearing guide.
IRM 5.11.1 notes that the IRS may issue the 6331(d) notice and the 6330 notice at the same time as the notice and demand in certain circumstances, though it generally waits 10 days after notice and demand.
Step 5: The levy is served on your employer
After the waiting periods pass with no resolution, the IRS can serve Form 668-W on your employer. IRM 5.11.2 notes that for a wage levy, the employer receives the levy, and the taxpayer learns of it through the employer; the IRS does not separately send the taxpayer a copy of a wage levy because the wage statement from the employer notifies the taxpayer.
From there, IRC 6331(e) makes the levy continuous until it is released. See Form 668-W explained.
When the steps can be skipped
The jeopardy exception. If the IRS finds that collection is in jeopardy, IRC 6331(a) allows immediate demand and levy without the 10-day wait, and IRC 6331(d)(3) and 6330(f)(1) relax the pre-levy notice requirements, with a post-levy hearing opportunity instead. Jeopardy is rare in ordinary wage levy cases. If you were levied with no notices at all, ask whether a jeopardy determination was made.
What if you never got the notices?
The law requires the notices to be mailed to your last known address, not that you actually receive them. If you moved and did not update your address with the IRS, the notices may have gone to the old address and still be valid. IRM 5.11.1 discusses this in the context of a separated spouse: if the address was the last known address when the notice was sent, it was a legally valid notice.
If the IRS skipped a required notice, that is a different story. A levy issued without the required CDP notice violates IRC 6330. IRM 5.11.2.4.1 gives that exact example of a levy in violation of law whose proceeds must be returned, subject to the time limits for requesting return. See getting levied wages back.
The windows, in plain terms
- Notice of deficiency: 90 days to go to Tax Court if you disagree with an audit or adjustment.
- Notice and demand: Pay, or start working on a plan. Interest and penalties are running.
- CP504: 30 days before the IRS may levy.
- LT11 or Letter 1058: 30 days to request a CDP hearing on Form 12153, which stops levy for those periods while it is pending.
- Levy served: Now you are working on release under IRC 6343.
The best time to deal with a wage levy is before step 5. The second best time is today. Start with how to stop a wage garnishment.
Every IRS notice before a levy is a door. The levy is what happens when nobody walks through any of them.