Most self-employed people on Long Island assume the IRS's wage levy authority does not apply to them. They do not have a traditional paycheck. They take owner's draws from their LLC, distributions from their S-corporation, or K-1 income from a partnership. These are not "wages" in the conventional sense — so the IRS cannot garnish them the way it garnishes an employee's paycheck.
This assumption is wrong, and it is one of the most expensive misconceptions I encounter in my practice.
I'm Charles Rosselli, a Long Island tax attorney. Self-employed individuals and business owners throughout Nassau County and Suffolk County face a version of IRS income levy that operates differently from a traditional wage garnishment — but is no less effective at stripping away the money you depend on to live and run your business. This article explains exactly how the IRS reaches self-employment income, what forms it takes, and why the self-employed on Long Island are not as protected as they think.
The IRS Has Multiple Paths to Your Income
For a W-2 employee, the IRS levies wages by sending a single notice to the employer. The employer withholds. The money goes to the IRS automatically from every paycheck.
For the self-employed, the mechanics are different, but the outcome is identical. The IRS does not have a single employer to contact. Instead, it identifies every source of income you receive and levies each one separately. This requires more effort from the IRS, but it also means the levy can hit you from multiple directions simultaneously.
The IRS can levy:
Owner's draws from a single-member LLC or sole proprietorship. If you take regular draws from your business account, the IRS can levy the bank account those draws come from. Once the business account is levied, your draw disappears along with every other dollar in the account.
S-corporation distributions. If your S-corporation pays you distributions — which many Nassau County and Suffolk County business owners use as their primary compensation vehicle precisely to avoid payroll taxes — the IRS can levy those distributions before they reach you. It can contact your corporation directly and require it to redirect distributions to the IRS.
K-1 income from a partnership. If you are a partner in a partnership or a member of a multi-member LLC taxed as a partnership, you receive K-1 income. The IRS can levy the partnership's obligation to pay you your distributive share.
Accounts receivable from clients. For freelancers, consultants, contractors, and other self-employed professionals throughout Nassau County and Suffolk County, the IRS can levy the money your clients owe you before they pay you. Your client receives a levy notice telling them to pay the IRS instead of you.
1099 income from regular clients. If you have recurring clients who pay you regularly — clients who file 1099s reporting your income — the IRS can identify those clients from its records and levy their obligation to pay you for future services.
The Nassau and Suffolk County Self-Employed Population
Long Island has an enormous self-employed population. Contractors and subcontractors throughout Nassau County and Suffolk County. Freelance professionals — graphic designers, IT consultants, writers, photographers — who work from home offices in Westbury, Commack, Plainview, and dozens of other communities. Medical and dental professionals in private practice across both counties. Real estate agents and brokers throughout Long Island's active property market. Financial advisors, insurance agents, and other commission-based professionals.
For all of these people, the IRS levy threat is real, and the self-employment structure provides no meaningful protection from it. In some ways, the self-employed face a more complex version of the levy problem than W-2 employees — because the IRS must pursue multiple income streams simultaneously, which means multiple simultaneous collection actions rather than a single employer garnishment.
The Accounts Receivable Levy Problem for Long Island Freelancers and Contractors
For Nassau County and Suffolk County freelancers, consultants, and contractors, the IRS levy on accounts receivable is the most professionally damaging variant of income levy.
When the IRS identifies a client who owes you money and serves a levy notice on that client, the client receives official communication from the Internal Revenue Service. The notice tells them that they owe a federal tax debt, that the money they owe you is subject to IRS levy, and that they must pay the IRS rather than paying you.
Your clients know. In professional services networks throughout Nassau County and Suffolk County — where referrals and relationships drive business — this information does not stay contained. The client who received the levy notice talks to other clients. The reputation damage from an IRS levy that reaches your client base can outlast the tax debt itself.
For contractors in Nassau County and Suffolk County's active construction and renovation markets, an accounts receivable levy served on a general contractor or developer can simultaneously disrupt multiple active projects. The contractor who hired you receives a levy notice. They stop payment. Your cash flow stops. The materials suppliers who were expecting payment from you are next in the cascade.
S-Corporation Owners: The Distribution Levy
Many Nassau County and Suffolk County business owners have structured their operations as S-corporations partly because of the tax advantages associated with taking distributions rather than salary. Distributions avoid the FICA payroll tax that applies to wages — a legitimate tax planning strategy.
What many of these business owners do not realize is that distributions are just as reachable by the IRS as wages. The IRS can serve a levy on your S-corporation directing it to redirect your distributions to the IRS. Your corporation is legally required to comply.
For business owners who have minimized their officer salary and taken most of their compensation as distributions — a common structure throughout Long Island's professional and business owner community — the distribution levy can capture the majority of their personal income in a single action.
Partnership Distributions and K-1 Income
For Long Island business owners operating through partnerships or multi-member LLCs taxed as partnerships, the IRS can levy the partnership's obligation to pay your distributive share.
This means the partnership — your co-owners, your business partners — receives a levy notice. They are informed that your share of partnership income is subject to IRS levy. They must redirect your distributive share to the IRS rather than to you.
This creates an extraordinarily uncomfortable dynamic with business partners. Your partners now know about your federal tax debt. They are legally entangled in your collection matter. The partnership's accounting and banking relationships are disrupted. And the personal dynamic between you and your partners — people you may have worked with for years, people whose trust and confidence you depend on — is strained in a way that is very difficult to recover from.
The Self-Employment Tax Irony
Here is an irony that many self-employed Long Island taxpayers encounter in a levy situation.
Self-employed individuals pay both the employee and employer share of FICA taxes through self-employment tax. This obligation is one of the most common sources of IRS debt for self-employed people throughout Nassau County and Suffolk County — quarterly estimated payments are missed, self-employment tax goes unpaid, and a significant balance accumulates.
The income stream the IRS is now levying to collect that self-employment tax debt is the same income stream that generated the tax in the first place. The levy takes money from the draws, distributions, or receivables that were the source of the income on which the tax was originally assessed. The self-employed person who could not afford to pay the tax when it was due now faces the IRS taking it forcibly from the same income source — with interest and penalties added.
Long Island's High-Income Self-Employed: A Special Risk
Nassau County and Suffolk County have a significant population of high-earning self-employed individuals — medical specialists in private practice, attorneys and accountants who operate their own firms, successful contractors and developers, financial advisors with established books of business.
These individuals often have complex income structures — salary, distributions, K-1 income, investment income, rental income — that create multiple simultaneous IRS levy targets. A high-earning Nassau County physician in private practice may have an S-corporation salary, partnership distributions from a group practice, accounts receivable from insurance companies and patients, and investment income from a brokerage account — all simultaneously reachable through IRS levy action.
The complexity of the income structure does not protect the high earner. It multiplies the number of simultaneous levy actions the IRS can deploy.
Why Hiring a Long Island Tax Attorney Is Different From a CPA or National Tax Resolution Firm
When the IRS is pursuing self-employment income through multiple simultaneous levy channels — accounts receivable, distributions, partnership income — you need someone with the legal authority and the strategic sophistication to address the full scope of the enforcement.
A CPA or accountant understands your income structure because they prepared your returns. But understanding the structure and having the legal authority to fight the IRS's levy actions against it are different things. A CPA cannot assert attorney-client privilege over your sensitive financial disclosures. They cannot represent you at IRS Appeals or in Tax Court. They cannot challenge levy procedures on legal grounds.
A national tax resolution firm will assign your complex, multi-source income levy situation to a case manager who processes cases by script. The analysis required to understand how the IRS is reaching your specific income streams — and the legal strategy required to intervene at each point — will not happen at a call center. I have spoken with Nassau County and Suffolk County self-employed clients who paid national firms significant fees while the IRS was simultaneously levying their clients' receivables and their S-corporation distributions, and the firm was still discussing payment plan options.
A Long Island tax attorney based in Nassau County brings what self-employment levy situations require:
Attorney-client privilege. Your income structure, your business relationships, your client list — all protected in our conversations.
Full legal authority. I can challenge levy procedures, pursue CDP hearings, appear at IRS Appeals, and file in Tax Court. These are legal tools a CPA cannot access.
Understanding of Long Island self-employment income structures. I have represented Nassau County and Suffolk County business owners with S-corps, partnerships, and complex income structures for over twenty years. I know exactly what the IRS is reaching for and how.
Protection of your client relationships. When the IRS is serving levy notices on your Nassau County and Suffolk County clients, the professional damage compounds with every day the situation continues. Speed matters.
Your Income Streams Are All Reachable
The self-employment structure you built — the LLC, the S-corporation, the partnership — does not protect your income from the IRS. Every dollar that flows toward you is potentially reachable through a levy. And the IRS will reach for all of them simultaneously once enforcement begins.
The Tax Problem Law Center is based in Garden City and represents self-employed individuals and business owners throughout Nassau County, Suffolk County, and New York State facing IRS income levy actions.
Contact our office to speak to a tax lawyer near you. You will speak directly with tax attorney Charles Rosselli — not a case manager, not a call center. Let's talk about your income structure and what the IRS is positioned to do with it.