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What is a State Tax Levy?

Jim B.
Updated May 16, 2024
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In the United States, a state tax levy occurs when the Internal Revenue Service (IRS) seizes the assets of a taxpayer in return for unpaid state taxes. This is essentially a legal effort by the IRS to get the money that it is owed, and it can come in the form of property seizure or wage garnishment. The IRS takes these steps only after initially contacting the taxpayer in question about the money owed and then issuing a final notice. After that, the state tax levy process begins and continues until the taxpayer steps forth with the required amount or until enough is collected from the taxpayer's assets to satisfy the debt.

Unpaid taxes can lead to serious financial problems for an individual. When the amount of unpaid taxes is severe or the time in which they were supposed to be paid is far past, the IRS may use several methods to collect this debt. The IRS may consider a lien on a taxpayer's property to secure the debt. In serious cases of unpaid state taxes, a state tax levy can be the final recourse and be exceptionally damaging to the taxpayer's financial standing.

At the point at which all avenues to contact and warn the delinquent taxpayer to pay the state taxes owed have been exhausted, a state tax levy will be undertaken. Once the IRS makes this judgment, it has the ability to levy any part of the income earned or held by the taxpayer. This can come via the garnishment of wages, existing bank accounts, or state tax refunds.

A state tax levy may also include the seizure of any property owned by the taxpayer. The IRS can also contact the taxpayer's employer or bank to notify them of the arrangement and of the fact that any funds the taxpayer has in his or her possession are now owed to the IRS until the debt is settled. In addition, a levy will also show up on the credit report of the taxpayer, further damaging his or her ability to get out of the financial hole.

Since a state tax levy is so severe, taxpayers should know of the options afforded to them to avoid this situation. First of all, they have the right to appeal the levy and question its legality. If they acknowledge that they owe the state taxes in question, they can structure a payment plan with the IRS that is suitable to both parties. Filing for bankruptcy is another option, which, albeit a drastic maneuver, may be the only way for the taxpayer to find his or her financial footing again.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Jim B.
By Jim B. , Former Writer
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own successful blog. His passion led to a popular book series, which has gained the attention of fans worldwide. With a background in journalism, Beviglia brings his love for storytelling to his writing career where he engages readers with his unique insights.

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Jim B.

Jim B.

Former Writer

Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own...
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