Collection Rights
Written in plain language for general understanding. This is educational content, not legal advice. Based on federal statutes and official sources.
What is this right?
When you owe taxes, the IRS has powerful collection tools — but your rights limit how and when they can use them. The IRS cannot seize your property without giving you notice and an opportunity to be heard. Certain property is exempt from seizure, and the IRS must follow specific procedures before garnishing wages, levying bank accounts, or placing liens.
The IRS also has a 10-year statute of limitations on collecting tax debt. After 10 years from the date of assessment, the debt expires.
When does it apply?
This right applies when:
- The IRS sends you a Notice of Intent to Levy (typically Letter 1058 or LT11)
- The IRS files a federal tax lien against your property (Notice of Federal Tax Lien)
- The IRS garnishes your wages or levies your bank account
- The IRS contacts your employer, bank, or other third parties about your tax debt
Common misconceptions:
- "The IRS can take everything I own" — No. Federal law exempts certain property: unemployment benefits, workers' comp, minimum exempt amount of wages, school books, undelivered mail, and necessary clothing.
- "Once the IRS levies my bank account, the money is gone" — Not necessarily. You have 21 days from the levy notice before the bank releases the funds to the IRS. You can request a Collection Due Process hearing during this time.
- "The IRS can come to my house and take my stuff without warning" — Not for the first seizure. They must send a Final Notice of Intent to Levy at least 30 days before the first levy action.
What should you do?
Step 1: If you receive a Notice of Intent to Levy, act immediately. You have 30 days to request a Collection Due Process (CDP) hearing — this stops the levy while your case is reviewed.
Step 2: Request a CDP hearing using Form 12153 within 30 days of the lien or levy notice. During the hearing, you can propose alternatives like a payment plan or Offer in Compromise.
Step 3: If your wages are being garnished, contact the IRS at the number on the levy notice. You can request a modification if the levy creates an economic hardship.
Step 4: If the 10-year Collection Statute Expiration Date (CSED) is approaching, consult a tax professional. In some cases, the best strategy is to wait out the statute.
Step 5: Contact the Taxpayer Advocate Service at 1-877-777-4778 if collection is causing a significant hardship (inability to pay for housing, food, or medical care).
What should you NOT do?
Don't miss the 30-day CDP deadline. After 30 days, you lose your right to a CDP hearing and can only request an "equivalent hearing" with fewer protections.
Don't hide assets. Transferring property to avoid IRS collection is a federal crime (IRC § 7206). The IRS can also reverse fraudulent transfers.
Don't sign a waiver extending the collection statute without professional advice. The IRS may ask you to extend the 10-year CSED — you generally have no obligation to agree.
Don't assume bankruptcy clears all tax debt. Some tax debts can be discharged in bankruptcy, but only if they meet specific age and filing requirements. Get professional advice.
How California differs from federal law
California FTB has its own collection powers and taxpayer protections:
- Collection statute: California has a 20-year statute of limitations on tax collection (vs. 10 years for the IRS). This is one of the longest in the nation.
- Earnings Withholding Orders: The FTB can garnish wages through an Earnings Withholding Order (EWO), taking up to 25% of disposable earnings.
- Bank levies: FTB can levy bank accounts with a "100% demand" — meaning they can take the entire balance, unlike the IRS which has exempt amounts.
- State tax liens: FTB automatically files liens when tax debt exceeds $250 (individual) or $1,000 (business). These appear on your credit report.
Additional Steps in California
Contact the FTB at (800) 689-4776 to discuss collection alternatives. Request a hearing if you believe the collection action is improper. Contact the Taxpayer Rights Advocate at (916) 845-3300.
Relevant Law: California Revenue and Taxation Code § 19255 (collection period), § 706.050 (earnings withholding), § 19221 (tax liens)
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