IRS Levy on Business Receivables Checklist
An IRS levy on business receivables occurs when the IRS sends Form 668-A notices to your customers or clients, instructing them to send their payments directly to the IRS instead of to you. The IRS sends the Final Notice of Intent to Levy to you first, giving you 30 days to respond before sending levy notices to your customers or third parties.
Only after the 30-day period expires, and if no hearing is requested or arrangement made, does the IRS then issue Form 668-A levy notices to customers instructing them to remit payments to the IRS. This type of levy targets the money flowing into your business and escalates quickly because customers may stop doing business with you once they learn the IRS is collecting.
Many business owners think a receivables levy only applies to invoices they have already issued. The IRS can levy ongoing, future payments from specific customers or from all customers until the tax debt is paid or the levy is released.
Eligibility and Scope
This checklist applies to you if you own a business with unpaid federal income tax, employment tax, or excise tax, and the IRS has sent you a Final Notice of Intent to Levy, or you have reason to believe a levy on receivables is imminent. You have customers, clients, or revenue sources the IRS can identify and levy, and you need to understand your rights before the levy takes effect or after a levy is issued.
This checklist does not apply if
- No unpaid federal tax debt exists on your account.
- Your only tax issue is a pending audit or examination not yet assessed.
- Your business has already ceased operations and has no active receivables.
- A bankruptcy trustee is handling your case, or active bankruptcy proceedings are
underway.
Critical Decision Factors
Whether you act before or after levy notices are delivered to your customers is the single biggest question. The speed of response and proof that you have a legitimate payment arrangement or financial hardship claim determine whether the IRS releases the levy or intensifies collection.
Valid assessments and proper Form 668-A issuance are what the IRS focuses on first, as this form is used for levying accounts receivable and other property held by third parties. Filing a timely request for a Collection Due Process hearing can prohibit the IRS from executing new levies on the property that is the subject of the hearing while the hearing and any subsequent appeals are pending.
Required Actions and Documentation
Before contacting the IRS, complete these steps
1. Locate and preserve the original Final Notice of Intent to Levy, as this document proves when the IRS notified you of its intent.
2. Confirm the tax assessment is valid by pulling your IRS transcript at IRS.gov under "Get
Your Tax Record" to verify the tax year, amount, and date.
3. Calculate the exact date the levy can legally take effect, which is 30 days after the final notice was mailed.
4. Contact each customer or revenue source you can identify and ask if they have received a levy notice from the IRS.
5. Prepare a written list of all customers known to have received the levy, including customer names, contact information, dates, and estimated revenue from each.
File a Request for a Collection Due Process hearing immediately if the levy has not yet taken effect. Use Form 12153 and mail it to the IRS address shown on your final notice within 30 days of that notice's date.
Gather documentation of any financial hardship caused by the levy. Collect copies of bank statements showing deposits before and after the levy, customer communications confirming
they have stopped or reduced payments, and correspondence with your accountant or bookkeeper documenting the cash flow impact.
Requesting Levy Release
Submit a written request for levy release based on either hardship, payment arrangement, or erroneous assessment as soon as possible after discovering the levy. Address the request to the Revenue Officer or the ACS unit listed on your notice, and include your case number, tax period, the original assessment, and a clear explanation of why the levy should be released.
If you have an approved installment agreement, request a levy release in writing. Installment agreements do not automatically release levies, so you must specifically request levy release after entering an installment agreement.
Critical Mistakes That Cause Denial
Waiting to see if the IRS will act instead of responding to the final notice eliminates your leverage, as the IRS proceeds automatically after 30 days pass without a response. Assuming you cannot request a hearing because the debt is legitimate ignores your right to request a
Collection Due Process hearing to contest how the IRS is collecting via levy on receivables.
Trying to hide which customers have been levied or failing to document the impact eliminates your paper trail. Without documented proof of lost income and customer impact, you cannot support a hardship claim or a request for release.
Paying the tax debt in full while the levy is active without explicitly requesting levy release first creates delays, as customers may continue sending payments to the IRS even after you have paid. Contacting customers before understanding your legal position can cause them to lose confidence in your business.
Not requesting a Collection Due Process hearing when eligible eliminates the only formal opportunity to present evidence of hardship, errors in the assessment, or a superior payment alternative. Filing for bankruptcy to stop the levy without first exploring IRS-specific remedies triggers other consequences that are more disruptive than Collection Due Process hearings or payment arrangements.
When Professional Representation Matters
Professional help becomes critical when the IRS has levied more than one customer or is levying ongoing payments, and you cannot quantify the total income loss or identify all customers affected. Financial conditions qualifying for hardship relief require documentation and clear articulation to the IRS that many taxpayers cannot provide effectively.
Disputed assessments underlying the levy or suspected errors in math, identity, or tax year require professional investigation and challenge. Levy release request denials or IRS non-response within reasonable timeframes demand escalation to the IRS Taxpayer Advocate
Service through experienced representation.
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