Tax Defense ✦ Levies
The IRS Took Your Paycheck. Here Is How It Gets Released.
An IRS wage levy leaves most Colorado workers with a fraction of their pay, and a bank levy empties the account in a day. Both can be released, usually quickly, once someone who knows the collection manual is on the file. North Star Law Firm releases levies, stops the next one, and puts a resolution in place, for a flat fee.
Overview
How levies work, and how they end
Before the IRS can levy, it must assess the tax, send a notice and demand, and send a final notice of intent to levy with 30 days to request a collection due process hearing. Once those steps are done, the IRS can levy wages, bank accounts, accounts receivable, retirement accounts, and, in extreme cases, real property, all without a court order. Releasing a levy means giving the IRS a reason under its own manual: the levy is causing economic hardship, a resolution has been reached, the statute of limitations has run, or the procedure was defective. We find the reason, document it, and get the release issued to the employer or bank.
- Wage levy release through hardship or a resolution
- Bank levy reversal within the 21-day holding period
- Levy prevention through a timely CDP request
- Release of levies on receivables and retirement accounts
- Colorado DOR distraint warrants released and prevented
- Economic hardship documented with a CPA-prepared financial statement
- Procedural defects identified from the account transcript
- Installment agreement or CNC status put in place so the levy doesn’t return
Colorado vs. the IRS
Who can take what from a Colorado paycheck
| Creditor | Court judgment required? | How much of your pay | Authority |
|---|---|---|---|
| Private creditor | Yes | Up to 20% of disposable earnings, or the amount above 40 times the minimum wage, whichever is less | C.R.S. § 13-54-104 |
| IRS | No | Everything above the exempt amount in Publication 1494 (often a few hundred dollars a week) | I.R.C. § 6331 |
| Colorado Department of Revenue | No | Distraint warrant on wages and accounts for assessed state tax | C.R.S. § 39-21-114 |
| Treasury (federal non-tax debt such as a defaulted SBA loan) | No | Administrative wage garnishment of 15% of disposable pay | 31 U.S.C. § 3720D |
Because Colorado is a separate-property state, a levy for one spouse’s tax reaches that spouse’s wages and separately owned assets, and the liable spouse’s share of joint accounts. A non-liable spouse’s own earnings are not on the table, which is a meaningful difference from the community property states we also practice in.
The Attorney-CPA Difference
A levy release is a financial statement with a legal argument on top.
The IRS releases a hardship levy when the financial statement shows the taxpayer cannot meet basic living expenses, measured against the IRS’s own Colorado expense standards. That statement (Form 433-A or 433-F) is an accounting document, and how it is prepared decides the outcome. We prepare it as CPAs, argue it as attorneys, and use the same numbers to put a permanent resolution in place so the levy does not come back.
- Form 433 prepared to the IRS Colorado allowable expense standards
- Hardship documented, not just asserted
- Employer and bank release coordinated the same day it issues
- Underlying resolution negotiated at the same time
- Colorado DOR warrant handled in the same engagement
Questions & Answers
Levy & Garnishment Release questions, answered
How much of my paycheck can the IRS take?
Far more than a Colorado creditor. A Colorado judgment creditor is limited to 20 percent of disposable earnings under C.R.S. § 13-54-104. An IRS wage levy is the reverse: the IRS takes everything except an exempt amount based on your standard deduction and dependents, published in IRS Publication 1494, which for many workers leaves only a few hundred dollars a week. Colorado’s garnishment cap does not apply to the IRS.
How fast can a levy be released?
Often within days once a representative is on the file and a resolution is proposed. The IRS must release a levy that is creating an economic hardship, and it will generally release one when an installment agreement or other resolution is in place. A wage levy is continuous until released; a bank levy takes what is in the account on the day it hits, after a 21-day holding period during which it can be reversed.
What is a distraint warrant?
Colorado’s version of a levy. The Department of Revenue can issue a distraint warrant under C.R.S. § 39-21-114 to seize wages, bank accounts, and property for an assessed Colorado tax without going to court. The state, like the IRS, will usually release a warrant once a payment plan or other resolution is established, and a timely protest of the underlying deficiency stays collection before the warrant issues.
Can the IRS levy my spouse’s wages for my tax debt?
In Colorado, generally not. Colorado is a separate-property state, so your spouse’s wages and separately owned property are not liable for a tax you owe alone. The IRS can reach property you own jointly to the extent of your interest. This is different from Texas, New Mexico, and California, where community property rules expose a non-liable spouse’s earnings; Colorado couples have more protection, which affects both collection defense and planning.
Will a levy stop if I file bankruptcy?
Yes, immediately, under the automatic stay of 11 U.S.C. § 362. Whether the underlying tax survives the bankruptcy is a separate question that depends on the age of the tax and when the returns were filed; see our discharging tax debt page for how that analysis works in the Tenth Circuit.
Talk to an attorney-CPA before you talk to the IRS.
A free consultation, a plain-English assessment, and a flat fee in writing if you decide to move forward.