IRS Levy on Rental Income – What Landlords in California Need to Know
Yes, the IRS Can Take Your Rental Income—Here’s What You Need to Do
If you're a landlord in California and received a notice that the IRS is attempting to levy your rental income, you need to act quickly.
Many property owners are surprised to learn that the IRS has the authority to seize rents directly from tenants or from property management companies.
This post explains how rental income levies work, how to protect your real estate investments, and how to resolve your tax debt before further enforcement occurs.
Can the IRS Levy Rental Income?
Yes. Under IRC §6331, the IRS can levy any third party who owes you money—including tenants. The IRS may:
- Send Form 668-W or 668-A to your tenant or property manager
- Demand that rent payments be redirected to the IRS
- Continue enforcement until your tax debt is resolved
Related: IRS levy vs lien differences
How Does a Rental Income Levy Work?
Here’s what usually happens:
- The IRS identifies you as a landlord with unpaid tax debt
- They send levy notices to your tenants or property manager
- Tenants are legally required to redirect rent payments to the IRS
- You lose cash flow, and your tenant relationships may be damaged
This can seriously disrupt your ability to:
- Cover mortgages
- Pay property taxes
- Fund repairs and maintenance
- Remain solvent
Related: IRS bank account levy in California
What Triggers This Type of Levy?
- Unpaid personal or business tax debt
- Ignored IRS notices (e.g., CP504, LT11)
- Failure to enter a resolution like an Installment Agreement
- No response to the Final Notice of Intent to Levy
If the IRS can’t get payment from your accounts, they will go after income streams like rent. Some taxpayers even report situations like IRS seized my bank account, which shows how serious enforcement can become.
Can Tenants Be Forced to Comply?
Yes. Tenants who receive an IRS levy notice are legally obligated to redirect payments—or risk personal liability. This can:
- Damage your tenant relationship
- Cause confusion or missed rent
- Trigger eviction or lease disputes
How to Stop the IRS from Taking Your Rental Income
1. Contact the IRS or Hire a Tax Professional Immediately
Respond quickly to the revenue officer or collections contact listed on the levy notice. A CPA can help you request:
- A levy release
- Using Currently Not Collectible status to stop levies
- A payment plan or settling debt with an IRS Offer in Compromise
2. Provide Financial Hardship Documentation
If losing your rental income jeopardizes your ability to:
- Pay mortgages
- Maintain properties
- Avoid foreclosure
…the IRS may agree to pause or release the levy. In many cases, you may still have options for stopping an IRS levy after it starts .
3. File a CDP or CAP Appeal
If you’re still within 30 days of the Final Notice of Intent to Levy, file Form 12153 for a Collection Due Process (CDP) hearing.
If the levy already occurred, you may be able to request a CAP appeal for administrative review.
Related: IRS Collection Appeals Program (CAP) vs CDP Hearings – What’s the Difference?
We Help California Landlords Stop IRS Rental Levies
At Boulanger CPA and Consulting PC, we:
- Respond to urgent IRS levy notices
- File for levy release or appeal
- Protect rental cash flow
- Resolve the underlying tax issue so future levies stop
If you’re struggling with tax enforcement and levies, you can explore more in Defend What’s Yours for strategies to protect your income and assets.
Call (657) 218-5700 or request landlord-focused assistance at www.orangecounty.cpa
Frequently Asked Questions
Can the IRS levy rental income?
Yes. The IRS can levy payments from your tenants directly, requiring them to send rent money to the IRS instead of to you until the tax debt is satisfied.
How does an IRS levy on rental income work?
The IRS sends a notice to your tenants instructing them to pay rent directly to the IRS. This levy continues until your tax debt is resolved or released.
Will I be notified before the IRS levies my rental income?
Yes. The IRS must send you prior notices, including a Final Notice of Intent to Levy. If ignored, they can contact tenants directly for payment.
Can rental income levies be stopped?
Yes. You can stop the levy by negotiating an installment agreement, requesting Currently Not Collectible status, or submitting an Offer in Compromise if you qualify.
How does this affect my tenants?
Tenants are legally required to comply with an IRS levy notice. If they don’t, they may become liable for the rent payments themselves.
Can I get levied rental income refunded?
Possibly, but only if the levy was issued in error or caused undue hardship. Refunds are rare once funds are applied to your balance.
Does California also levy rental income?
Yes. The California Franchise Tax Board (FTB) can levy rental payments if state taxes are owed, similar to IRS enforcement.
Should I get professional help if my rental income is levied?
Yes. Professional help ensures you respond quickly, negotiate relief, and protect both your property and your tenant relationships.
📣 About the Author
Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.
He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.
With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.
Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.
Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.
📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.
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