How To Protect Your Family’s Assets During A Tax Levy: A Legal Overview

In this article, you can discover…

• How tax levies differ from liens, and how to prevent them.
• Whether the IRS can levy a joint bank account.
• The steps you can take to release a tax levy, and how an attorney can help.

What Is A Tax Levy? How Do They Differ From Liens?

A tax levy is an active form of collection—meaning the IRS can seize your bank account, garnish wages, or take other assets to satisfy your debt.

A tax lien, on the other hand, is passive—it attaches to your assets, preventing you from selling or refinancing them without first addressing the debt. A lien might not immediately take money from you, but it can create serious obstacles when dealing with property or credit.

If you have a lien and need to sell or refinance an asset, there are ways to address it with the IRS, and an experienced tax levy attorney in South Carolina or North Carolina can help you navigate those options.

Is It Possible To Prevent A Tax Levy Before It Starts?

Generally, the best way to prevent a tax levy is to address your tax balance as soon as possible—either by paying it off or setting up a payment agreement.

If you ignore the balance, the IRS will send a series of notices, each becoming more aggressive. The final notice, called a Final Notice of Intent to Levy, is the last warning before they start seizing assets. At this stage, you still have appeal rights, but you must act quickly to protect yourself from wage garnishments and bank levies.

Can The IRS Levy Joint Bank Accounts?

An IRS bank levy is an incredibly challenging experience. In fact, the IRS can levy a joint bank account if one of the account holders owes a tax debt. However, if the non-liable spouse or co-owner can prove that all the funds in the account belong to them (not the taxpayer who owes), they may be able to get the levy released—but this can be difficult.

For example, if a parent is on a child’s bank account for convenience, but all deposits came from the child or grandparents, it may be easier to prove that the funds should not be subject to the levy. The same applies to elderly parents and their adult children who share an account for caregiving purposes. In any case, it takes substantial proof and effort to recover funds once a levy has been placed.

What Happens To Retirement Accounts Or Savings Accounts During A Tax Levy?

During a tax levy, the IRS can seize checking, savings, and retirement accounts, though the process differs for each.

Checking and savings accounts are the first targets for the IRS because they are the easiest to levy. Once the Final Notice of Intent to Levy is issued and not appealed, the IRS can instruct the bank to freeze the account. The bank then holds the funds for 21 days, giving you a chance to claim financial hardship or necessary expenses. If no relief is granted, the funds are sent to the IRS on the 21st day. If the IRS wants to levy again, they must issue another notice.

Retirement accounts can be levied, but the IRS must meet additional legal requirements before seizing these funds, making it a bit more challenging to do so. While not as common, it does happen in cases where taxpayers owe significant debts.

Can I Stop Wage Garnishment Caused By A Tax Levy?

There are ways to stop an IRS wage garnishment, but it requires taking action quickly. Unlike a bank levy, which is typically a one-time event, wage garnishment is continuous, ceasing only when the tax debt is fully paid or resolved.

The most effective way to stop wage garnishment is to demonstrate to the IRS that the garnishment prevents you from meeting necessary living expenses. This typically involves gathering financial records, including income statements, expenses, and asset information, to show that the garnishment leaves you unable to afford essential costs like housing, utilities, food, and medical care.

Other options include negotiating an installment agreement, submitting an Offer in Compromise, or proving financial hardship. Consulting a tax professional can help navigate the process and improve the chances of stopping the garnishment efficiently.

What Steps Can I Take To Release A Tax Levy?

Releasing a tax levy requires taking proactive steps to resolve the outstanding debt. The IRS will not lift a levy unless an alternative arrangement is made. Here are some of the main options that may be helpful to you:

Pay The Tax Debt In Full

The simplest way to release a levy is to pay the total amount owed. However, if this isn’t feasible, other options are available.

Enter Into An Installment Agreement

The IRS may release a levy if you set up a structured payment plan. There are different types of installment agreements, including full-payment plans and partial-payment installment agreements for those who cannot afford to pay the full amount before the collection statute expiration date—typically 10 years.

Submit An Offer In Compromise

If you can demonstrate financial hardship, you may qualify to settle your debt for less than what you owe. The IRS will review your income, expenses, and assets to determine eligibility.

Request A Partial Levy Release

In some cases, the IRS may agree to release only part of the levy if it allows you to maintain basic financial stability.

A tax professional can help determine the best approach for your situation and work with the IRS to stop or release a levy as quickly as possible.

Protecting Families’ Assets During Tax Levies

A tax levy can create significant financial and emotional stress, especially for families already struggling to meet their daily expenses. One case I took on highlights the importance of swift, experienced action and professional intervention in resolving these situations.

A husband and wife came in seeking tax debt relief in South Carolina after the IRS had already begun levying their wages due to joint tax debt exceeding $250,000. The wife, who worked in the hospital system, was left with only $500 per pay period after the levy, making it nearly impossible to cover essential expenses like rent, medical bills, and car payments.

Recognizing the urgency, we quickly contacted the IRS revenue agent handling the case and helped the couple gather the necessary financial information to demonstrate their hardship. Within 30 days, we successfully had the levy released by proving that it prevented them from affording basic living expenses. Instead of continued wage garnishment, we secured a voluntary installment agreement, allowing them to make manageable payments without risking job-related complications.

This case makes clear the value and importance of working with the IRS proactively. Addressing levies promptly and negotiating alternative solutions, such as installment plans, can provide you with financial relief while protecting your employment.

Still Have Questions? Ready To Get Started?

For more information on protecting assets during tax levy in South Carolina, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (803) 797-4600 today.