Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Levy

What it is:

A levy is the seizure of property in order to repay debt. In the U.S., the IRS has the authority to levy. (For everybody else, this is called foreclosure or repossession.)

How it works (Example):

Let’s assume John Doe owns a house in the country and hasn't filed a tax return for five years. The IRS catches up to him and sends him a $45,000 tax bill. John has fallen on hard times lately, and is unable to pay the taxes. Accordingly, the IRS levies the house.

Levies can be on property, wages, bank accounts or anything else of value. A levy is not the same as a lien. A levy actually takes the property; a lien just places a restriction on the sale or transfer of the property.

Why it Matters:

Taxing authorities are always anxious to get their money, but they must give written notice to a taxpayer before levying a taxpayer's assets. States also have the authority to impose levies for the lack of payment of state income taxes.