IRS Levy on Unemployment Benefits – What You Should Know
Struggling with IRS Debt While Unemployed? Here’s What to Watch For
If you owe back taxes and you're receiving unemployment benefits, you might be wondering: Can the IRS levy or seize this income?
The answer depends on where your benefits come from and what kind of levy the IRS is attempting.
In this post, we explain whether unemployment is protected from IRS levies, what exceptions apply, and how to protect your benefits while resolving the underlying tax debt.
Can the IRS Levy Unemployment Income?
Yes—but only under certain conditions.
The IRS can levy federal unemployment benefits or other federal payments through the Federal Payment Levy Program (FPLP).
However, state-issued unemployment benefits are generally not subject to levy through the same channels—unless:
- They are direct-deposited into a bank account
- You owe back taxes and the IRS levies the bank account, not the benefit itself
This often leads to IRS bank account levy in California cases, where taxpayers wake up to find their EDD unemployment benefits frozen. Many even tell us, IRS seized my bank account, and they’re left scrambling to cover rent, food, or medical bills.
When Does the IRS Levy Federal Payments?
The IRS can levy certain federal payments through FPLP, including:
- Social Security
- Federal retirement pensions
- Federal contractor payments
- Some federal unemployment supplements (e.g., pandemic-era benefits)
But state unemployment payments issued by EDD (California) or other state agencies are not directly levied at the source.
How the IRS Can Still Reach Your Benefits Indirectly
Even if unemployment benefits themselves aren’t levied at the source, the IRS can still reach them by:
- Issuing a bank account levy
- Freezing your checking account where your unemployment is deposited
- Issuing a wage levy if you return to work
This means you must take early action to avoid enforcement altogether.
This is where IRS wage garnishment enforcement comes in—once you find employment again, the IRS may garnish your paycheck before you even see it.
That’s why early action is critical. If you received a warning letter, know that responding to an IRS notice of intent to levy quickly can mean the difference between keeping your benefits and losing them to enforced collection.
What to Do If You’re Receiving Unemployment and Owe IRS Debt
1. Request Currently Not Collectible (CNC) Status
If you’re unemployed and unable to pay, you may qualify for CNC status. This is a proven strategy—using Currently Not Collectible status to stop levies ensures:
- Stops all collection activity
- Prevents levies and garnishments
- Keeps your file out of active collections
2. Submit a Financial Disclosure
Complete:
- Form 433-A or 433-F
- Include unemployment payment proof
- Document essential living expenses
3. File a CDP Request (If Within 30 Days)
If you received a Final Notice of Intent to Levy, file Form 12153 within 30 days to request a Collection Due Process hearing and stop collection.
Related: IRS Collection Appeals Program (CAP) vs CDP Hearings – What’s the Difference?
4. Propose a Resolution
If you’re able to make small payments, consider:
Both of these can pause or prevent levies—even if your income is unstable.
We Help Orange County Taxpayers Protect Income While Unemployed
At Boulanger CPA and Consulting PC, we:
- Stop IRS levies and wage garnishments
- Protect unemployment and hardship-based income
- Submit CNC, OIC, or payment plans
- Resolve IRS debt without aggressive collections
📞 Call (657) 218-5700 or request help at www.orangecounty.cpa
And if you want to understand more ways to shield your income and property, you can always explore more in Defend What’s Yours.
Frequently Asked Questions
Can the IRS levy unemployment benefits?
Generally, the IRS cannot directly levy state unemployment benefits. However, if unpaid taxes exist, other income sources and refunds may be levied instead.
Does the IRS levy federal unemployment programs?
Yes. Certain federal unemployment and pandemic relief programs may be subject to levy if administered through federal agencies.
What income sources are more likely to be levied?
The IRS typically levies wages, bank accounts, Social Security benefits, and contractor payments. State unemployment benefits are usually exempt.
Can the California FTB levy unemployment benefits?
Yes. The Franchise Tax Board (FTB) may levy unemployment benefits for unpaid state taxes, unlike the IRS, which generally cannot.
What happens if I owe taxes while on unemployment?
You may qualify for Currently Not Collectible status or an Offer in Compromise if you cannot pay while unemployed.
Will the IRS take my tax refund while I’m unemployed?
Yes. The IRS can offset federal or state refunds to pay back taxes, even if you are unemployed.
Should I get professional help if I receive a levy notice while unemployed?
Yes. Professional representation can help you stop enforcement, protect exempt income, and negotiate affordable resolution options.
📣 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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