New Jersey Wage Garnishment Checklist
A bank levy is a state enforcement action New Jersey uses to collect unpaid tax debt directly from your bank account. The New Jersey Division of Taxation issues levies when tax debt remains unpaid after other collection attempts have been made. This is a serious action, but it follows a specific process with identifiable steps. Understanding what a bank levy is, why it happens, and what your options are can help you respond effectively and prevent your account from being frozen.
Ignoring a levy notice typically results in funds being removed from your account without further notice. The state uses levies as a final collection tool when payments are not made voluntarily. Knowing what to expect and how to respond helps protect your financial stability and allows you to address the underlying tax debt.
What This Issue Means
A bank levy is a legal order from the New Jersey Division of Taxation that instructs your bank to freeze and hold funds from your bank account. The frozen funds are then transferred to the state to pay toward your unpaid tax debt. A levy does not mean criminal charges have been filed against you. It means the state has determined you owe taxes and is using a debt collection tool authorized under state tax law to recover that money.
The state must first file a Certificate of Debt or Docketed Judgment with the Clerk of the
New Jersey Superior Court before conducting a bank levy. This judgment establishes
the legal authority for the levy action and becomes part of the Superior Court's public record.
Why the State Issued This or Requires This
New Jersey issues levies as part of its standard collection process for unpaid tax debts.
Typically, the state sends multiple notices and bills before issuing a levy. If you do not respond to those notices or do not pay the debt, the Division of Taxation moves to more aggressive collection methods. The levy is issued under the authority of the New Jersey
Gross Income Tax Act and other state tax law statutes.
Under this law, if tax remains unpaid 10 days after notice and demand, the Director may issue a Certificate of Debt. Once this Certificate of Debt or Docketed Judgment is filed with the Superior Court, the Judgments Unit can conduct a bank levy using Warrants of
Execution. The state uses levies because they are an effective way to secure payment when voluntary payment has not occurred.
What Happens If This Is Ignored
If you ignore a bank levy notice, the state will proceed with freezing your bank account.
Your bank is legally required to comply with the levy order and will hold the specified funds. In New Jersey, banks typically hold levied funds for at least 21 days before releasing them to the state. After the holding period, those funds are transferred to the
State of New Jersey.
Once the transfer occurs, the money is no longer in your account and cannot be withdrawn or accessed with a debit card. The underlying tax debt remains on your
account, and additional collection actions may follow if the debt is not fully resolved.
Ignoring a levy does not make it go away; it allows the collection process to continue.
What This Does NOT Mean
A bank levy does not mean you have committed tax fraud or a crime. It is a civil collection tool, not a criminal action. A levy does not mean all your funds will be taken permanently. The state typically levies a specific amount related to your tax debt. New
Jersey banking law protects the first $1,000 in your bank account from being taken through personal property exemptions. However, this protection must be claimed through an exemption claim and is not automatic.
A levy does not mean your case is closed or settled. The levy is one step in the collection process, and additional notices or actions may occur afterward. You still have the right to dispute the debt or request payment arrangements, even after a levy is issued.
Checklist: What to Do After Receiving a New Jersey Bank
Levy Notice
Follow these steps in order if you receive a bank levy notice or if your bank account has
been levied
Step One: Read the Notice Carefully
- Locate the notice from the New Jersey Division of Taxation or the Judgments
Unit.
- Identify the tax year(s) involved and the amount claimed as owed.
- Find the date the levy takes effect and note whether it references a Certificate of
Debt or a civil judgment.
- Write down the contact information provided in the notice.
- Keep this notice in a safe place with other tax documents.
Step Two: Verify the Debt
- Review your own tax records to understand what amount is owed.
- Check whether you filed a return for the year(s) listed in the notice.
- Determine whether you made any payments toward this debt.
- Look for any previous notices or correspondence about this debt.
- Note any discrepancies between what you believe is owed and what the notice
states.
Step Three: Contact the Division of Taxation Immediately
- Call the New Jersey Division of Taxation at the phone number listed on the
notice.
- Have your Social Security number, the notice, and any payment records ready.
- Ask the representative to confirm the exact amount owed.
- Ask whether the levy can be delayed while you arrange payment.
- Request written confirmation of the debt amount and your account status.
- Keep a record of the date, time, and name of the person you spoke with.
Step Four: Notify Your Bank
- Contact your bank and inform them that you received a levy notice.
- Ask your bank for details about how the levy will be processed.
- Ask your bank about the timeline for freezing and transferring funds; in New
Jersey, funds are typically held for at least 21 days.
- If you have a joint bank account, ask whether funds in the other account holder's
name are protected.
- Ask whether any portion of your account is protected, such as the $1,000
personal property exemption or exempt funds like Social Security benefits.
- Request written confirmation from your bank about the levy.
Step Five: Determine if Your Funds Are Exempt
- Identify whether your bank account contains exempt funds that may be protected
from levy.
- Social Security benefits, Supplemental Security Income, and Veterans' benefits
are generally protected under federal laws.
- Child Support payments, Spousal Support, Public Assistance, and Welfare
benefits may also be protected.
- Workers' Compensation disability payments and certain student financial aid are
typically exempt.
- If your account contains only exempt funds, you must file an objection to levy,
accompanied by supporting bank statements showing the source of the deposits.
- Contact the Division of Taxation immediately to inform them if your account
contains protected funds and file your exemption claim promptly.
Step Six: Gather Documentation
- Collect all tax returns you filed for the year(s) in question.
- Gather receipts or records of any payments you made toward this debt.
- Collect any prior notices from the Division of Taxation about this debt.
- If claiming exempt funds, gather bank statements showing direct deposits from
Social Security, disability, or other protected sources.
- Write down dates of any previous phone calls or communications with the state.
- Keep all documentation in one place.
Step Seven: Explore Payment Options
- Ask the Division of Taxation whether a payment plan is available; New Jersey
offers installment plans with standard terms up to 60 months and extended terms beyond 60 months with additional requirements.
- Inquire about the specific terms and monthly payment requirements (minimum
$25 per month).
- Be aware that payment plans beyond 60 months require submission of financial
statements and are subject to approval.
- Note that the state will continue to add interest to your unpaid tax balance during
the payment plan period.
- Ask for a written quote or agreement if any payment plan is offered.
- Understand that New Jersey does not have a formal Offer in Compromise
program; instead, the state has a Closing Agreement option, though the criteria are not well-defined.
Step Eight: Submit Payment if Possible
- Determine the exact amount the Division of Taxation will accept as payment for a
Judgment Payoff.
- Ask the Division of Taxation for acceptable payment methods (check, money
order, electronic transfer).
- Be prepared to submit payment in certified funds if paying off the full balance.
- Ask for the correct mailing address if paying by mail.
- Ask about online payment options available through the state.
- If paying by mail, use certified mail with a return receipt requested.
- Keep a copy of your payment receipt or confirmation.
Step Nine: Follow Up in Writing
- Send a written summary of your situation to the Division of Taxation or
Judgments Unit.
- Include copies (not originals) of supporting documents.
- State the specific action you are requesting (payment plan, release of levy,
exemption claim).
- Include your Social Security number, the tax year(s) involved, and the amount in
dispute.
- Send this by certified mail, return receipt requested.
- Keep a copy for your records.
Step Ten: Monitor Your Account and Correspondence
- Check your bank account status regularly after the levy date.
- Watch for any additional notices from the Division of Taxation.
- Review your bank statements to see what funds were transferred.
- Keep all notices and correspondence together.
- Respond to any future notices from the state within the stated deadline.
Common Mistakes to Avoid
Missing the Response Deadline: Do not ignore the levy notice; it will not go away.
Respond to the state as soon as possible, ideally within the 21-day holding period.
Delayed responses may result in funds being transferred before you have a chance to resolve the issue.
Not Contacting Your Bank: Do not wait to see if your account gets frozen. Contact your bank as soon as you receive the notice so you understand how the process will work. Ask specifically about the $1,000 personal property exemption and whether you need to file paperwork to claim it.
Failing to Claim Exempt Funds: If your account contains Social Security benefits, disability payments, or other protected funds, you must actively file an exemption claim.
Banks do not automatically protect these funds; you must provide bank statements and documentation proving the exempt status of your deposits.
Providing Incomplete Information: Do not submit a payment or request without including your Social Security number and the specific tax year involved. Incomplete information slows down processing and may result in your request being rejected.
Failing to Keep Records: Do not discard any notices or correspondence from the
Division of Taxation. You may need these documents to prove you contacted the state, made payments, or disputed the debt.
Not Following Up in Writing: Do not rely only on phone conversations with the
Division of Taxation. Follow up any phone calls with written communication sent by certified mail so you have proof of your actions.
Frequently Asked Questions
How much money will the state take from my bank account?
The amount levied typically corresponds to the unpaid tax debt, including assessed penalties and interest. Contact the Division of Taxation to confirm the specific amount.
Your bank can also provide details on the amount that will be frozen.
Can I stop a bank levy after it has been issued?
This depends on the timing and circumstances. If the levy has not yet been processed by your bank (within the 21-day holding period), contacting the Division of Taxation may allow you to arrange a payment plan or settlement before funds are transferred. If the levy has already been processed, the funds are transferred to the state.
Will a bank levy affect my credit score?
Tax liens and levies are no longer reported directly to credit bureaus as of 2018. A bank levy itself does not appear on your credit report. However, the Certificate of Debt or
Docketed Judgment filed by the state is a public record and may be discovered by lenders during credit applications.
What if the amount the state says I owe is wrong?
You have the right to dispute the amount. Contact the Division of Taxation immediately and explain why you believe the amount is incorrect. Provide documentation supporting your position, such as copies of filed returns or payment receipts.
Can the state levy my account if I am receiving Social Security or disability benefits?
Social Security benefits, Supplemental Security Income, Veterans' benefits, and certain disability payments are generally protected under federal laws. However, you must file an exemption claim with supporting bank statements proving these are the only funds in your account. Contact your bank immediately to ask about protections that apply to your specific account.
What happens if I set up a payment plan?
If you arrange a payment plan with the Division of Taxation before the levy is processed, the state will typically release the levy once the agreement is in place. Confirm this in writing before the 21-day holding period expires. Be aware that if your tax liability exceeds $2,500 or your payment plan term is longer than 12 months, the state will file a
Certificate of Debt against you.
Will the state levy my account again if I do not pay the full debt?
If the debt is not fully resolved through the initial levy, the state may pursue additional collection actions. These could include another levy, wage garnishment, or other enforcement measures. Contact the Division of Taxation to arrange a payment plan or settlement to prevent further action.
Facing State Tax Enforcement Action?
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