What Does an IRS Tax Levy Mean in Texas?

 Posted on June 28, 2026 in Tax & Income Garnishment

Receiving notice that the IRS intends to seize your property or income is one of the most alarming things that can happen. If you have unpaid federal taxes and the IRS has started sending notices, finding out exactly what an IRS tax levy is is the first thing you need to do so you can understand your options. Our Boerne, TX bankruptcy attorney helps good people in tough situations deal with IRS tax levies. Call us today at 210-342-3400. 

What Is an IRS Tax Levy?

A tax levy is the IRS's legal right to seize your property or assets to satisfy a tax debt you have not paid. Unlike a tax lien, which is a legal claim against your property, a levy is the actual taking of that property. Once the IRS follows through on a levy, they can get what you owe directly from your assets without going through a court first.

What Can the IRS Actually Take with a Tax Levy?

The IRS has the authority to take many different types of your property with a tax levy. These include:

• Wages and salaries, taken directly from your paycheck before you receive it

• Bank account balances

• Social Security benefits

• Retirement accounts, including IRAs and 401(k)s

• Rental income

• Commissions and dividends

• The cash loan value of life insurance policies

• Licenses

• Physical property such as vehicles, boats, and real estate

An IRS wage levy, sometimes called a wage garnishment, is one of the most common forms of IRS tax levy. With wage garnishment, your employer is legally required to send part of every paycheck directly to the IRS until the debt is paid or the levy is released. 

A bank levy is also common, where the IRS can instruct your bank to freeze and hand over funds in your account. Unlike wage levies, which are ongoing, a bank levy typically takes whatever is in the account on the day it is issued.

What Has to Happen Before the IRS Can Levy You?

The IRS can’t just take your property without warning. Federal law requires the agency to follow a specific process before a levy goes into effect.

Step One: Tax Assessment and Notice of Demand

First, the IRS must assess the tax you owe and send you a Notice and Demand for Payment. This is a formal bill telling you what you owe and asking you to pay it.

Step Two: Failure to Pay

If you do not pay, set up a payment arrangement, or otherwise respond to resolve the debt, the IRS moves forward in the process and will send multiple follow-up letters. 

Step Three: Final Notice of Intent to Levy

Before seizing anything, the IRS must send you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. By law, you have 30 days from the date of that notice to request a Collection Due Process with an IRS Settlement Officer before the levy takes effect. 

If you have received this final notice and are within that window, contact an attorney immediately.

Can Bankruptcy Stop an IRS Tax Levy in Texas?

When you file for bankruptcy, something called the automatic stay goes into effect immediately. The automatic stay is a legal protection built into federal bankruptcy law that stops virtually all collection activity against you, including IRS levies. 

For many people dealing with an IRS levy, filing for bankruptcy gives them the breathing room they need to take action. But the automatic stay is only the beginning of the conversation about what to do with the debt. 

Can You Discharge IRS Tax Debt in Bankruptcy?

Some income tax debts can be discharged in bankruptcy, but not all of them. Several conditions must be met:

• The tax debt must be for income taxes, not payroll taxes or fraud penalties.

• The tax return for the year in question must have been due at least three years before you file for bankruptcy.

• You must have actually filed that year’s return at least two years before filing for bankruptcy.

• The IRS must have assessed the tax debt at least 240 days before your filing date.

• You must not have committed tax fraud or tried to evade the tax.

When all of these conditions are met, the debt may be treated like other unsecured debt and discharged in a Chapter 7 case. If some conditions are not met, Chapter 13 may still allow you to repay the tax debt over a three- to five-year plan at more manageable terms, often without additional penalties accumulating.

What If the IRS Has Already Started Garnishing My Wages?

Filing for bankruptcy after a levy has already begun can still stop it. The automatic stay applies even to ongoing wage garnishments. If your employer has already been instructed to withhold part of your paycheck for the IRS, a bankruptcy filing can put that on hold while your case is sorted out.

However, the IRS can also request that a bankruptcy court lift the automatic stay in certain circumstances, particularly if the debt is not dischargeable. This is one reason why having an attorney who understands both bankruptcy law and IRS collection procedures is so important. 

Can You Pay Off Income Tax Debt with IRS Payment Plans?

Bankruptcy is not the only option for dealing with an IRS tax levy. Depending on your situation, other approaches may be worth exploring, including:

• An installment agreement, which lets you pay the debt over time

• An Offer in Compromise, which allows qualifying taxpayers to settle their debt for less than the full amount owed

• Currently Not Collectible status, which temporarily pauses collection if you can prove that you can’t afford to pay

• A Collection Due Process hearing, which can delay the levy and give you a chance to propose alternatives

Each of these options has its own eligibility requirements and trade-offs. Some may be more appropriate than bankruptcy depending on the size of the debt, whether the debt is dischargeable, and your overall financial picture. An attorney can help you weigh which path makes the most sense for your situation.

Contact a Boerne, TX Bankruptcy Attorney Today

At the Law Offices of Chance M. McGhee, our Kerrville IRS tax levy lawyer has more than 20 years of experience helping Texas families and individuals figure out difficult IRS collection issues and find a path forward. We offer free consultations so you can understand your options before making any decisions. 

Call 210-342-3400 today.