Growing up near the Mississippi River, I knew a levy (sic) as a big flood control feature in the land adjacent to it. But ya (sic) that was before I learned how to spell (i.e. before spellcheck). Those “levees” were great at what they did in keeping us dry. But the “levy” I know today being a CPA living in the desert southwest, is one that, while it sounds the same, is spelled a bit differently and has a totally different meaning.
A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a legal claim against property to secure payment of the tax debt, while a levy actually takes the property to satisfy the tax debt. Internal Revenue Code 6331 authorizes the IRS to collect tax on any property or right to property that belongs to the taxpayer on which there is a federal tax lien. That can include:
- Retirement accounts
- Bank accounts
- Rental income
- Accounts receivable
- The cash loan value of your life insurance
Or, the IRS could seize and sell property that you hold such as cars, boats, motorcycles and even your house.
Now that I’ve driven up your anxiety level, here’s a fun fact to hopefully bring it back down. The historical definition of the word is a noun meaning the act of enlisting troops. Perhaps it took a levy to build the levees along the Mississippi and a levy on taxpayers to pay for it.
Dale F. Jensen, CPA