IRS Levy Compliance Review 2025: What You Need to Know

Accounting, Tax News

The Treasury Inspector General for Tax Administration (TIGTA) has issued its annual audit evaluating how the IRS handled asset levies between July 2023 and June 2024.

While the IRS complied with federal requirements in over 99% of cases, TIGTA still uncovered serious violations impacting hundreds of taxpayers and resulting in more than $900,000 in improper collections.

These findings highlight a crucial reminder: even with strong compliance rates, taxpayers must fully understand their Collection Due Process (CDP) rights before the IRS can seize assets.

Understanding Collection Due Process Rights

A levy gives the IRS authority to seize property—including bank accounts, wages, or other assets—to collect unpaid taxes.
However, under the IRS Restructuring and Reform Act of 1998, the IRS must:

Send written notice of intent to levy at least 30 days in advance, and
Inform the taxpayer of the right to request a Collection Due Process (CDP) hearing.

During a CDP hearing, a taxpayer can:

Challenge the proposed levy
Request alternatives (e.g., installment agreements)
Raise hardship or spousal defenses
Assert procedural violations

These protections ensure due process before enforcement occurs.

Key Findings from the 2025 TIGTA Review

TIGTA examined levies affecting 46,000+ taxpayers and identified 357 cases where the IRS did not fully follow CDP requirements. Below are the main issues:

1. Missing or Unsent CDP Notices

43 taxpayers never received the required CDP notice
Resulted in $442,000 in improperly collected levy proceeds
Often caused by revenue officer oversight or system reversals

2. Levies Issued During Active Hearings

96 levies were issued while CDP hearings were still pending
Nearly $38,000 was improperly collected
Violates rules prohibiting enforcement during an active appeal

3. Incomplete 30-Day Notice Period

106 taxpayers did not receive the full 30-day notice window
Mostly due to manual processing errors

4. Missing Notices for New Tax Assessments

112 taxpayers were not sent updated levy notices after additional assessments
Led to $275,000 in improper levies

5. Problems with Manual Levies

Manual (non-automated) levies were a major cause of compliance failures due to the lack of built-in system safeguards.
Revenue officers had to manually verify notice compliance—leaving room for human error.

6. Failure to Notify Power of Attorney Representatives

In 472 cases, notices were not sent to taxpayer representatives
TIGTA identified 8 confirmed failures in a 100-case sample
Errors potentially denied taxpayers their right to appeal in Tax Court

IRS Response and Corrective Actions

The IRS agreed with three of TIGTA’s four recommendations and partially agreed with the fourth. Improvements will include:

Updating levy procedures to require verified notice issuance
Refunding affected taxpayers (and retaining funds only when legally permissible)
Adding levy-compliance metrics to employee performance reviews
Notifying taxpayers whose representatives were not copied on notices
Increasing oversight of manual levies and enhancing system safeguards

Why This Matters for Taxpayers

Despite a high compliance rate, the errors identified show that procedural failures can still compromise taxpayer rights.

If you owe back taxes or believe a levy may be issued, you should:

Ensure you receive a 30-day notice of intent to levy
Request a CDP hearing immediately if you disagree with the action
Confirm your Power of Attorney receives all corresponding notices
Maintain records and timelines for any IRS communication
Seek help quickly if you suspect improper levy action

Taxpayers who did not receive proper notice may qualify for refunds or reversals of improperly collected funds.

The Takeaway

TIGTA’s 2025 review shows that even with improved oversight, manual processes and communication failures still create risks for taxpayers.
Understanding your due-process rights—and acting quickly when you receive any levy notice—remains the strongest protection against financial harm.

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