IRS Levy Release: How to Remove a Tax Levy

How to Release or Stop an IRS Tax Levy

What to Do If You Receive an IRS Notice of Intent to Levy?

If you receive a Final Notice of Intent to Levy from the IRS, the agency can start seizing your assets in 30 days — unless you take action. With a tax levy, the IRS can seize a variety of assets and they don’t state which assets they will levy. In most cases, they generally go after the easiest to obtain assets first. Below are some of the most common types of property the IRS will attempt to seize.

  • Wages: The most common form of tax levy is a wage garnishment. With this form of levy, the IRS can seize wages, commissions, bonuses, and other income.
  • Bank Account Funds: The IRS can use a tax levy to seize funds directly from your bank account.
  • Business Assets: The IRS can take and sell off business assets in order to pay the unpaid tax balance.
  • Personal Assets: This includes your home, car, boats, or anything else of value that you own.
  • Social Security Benefits: The IRS can take a portion of your Social Security income.

Fortunately, the IRS prefers to work with taxpayers so if you make arrangements you have a good chance at stopping a tax levy before it starts.  The W Tax Group can show you how, but in the meantime, here is an overview of how to get a levy released. Take a look at some of your options.[/vc_column_text]

IRS Levy Release: How to Remove a Tax Levy

The process to remove an IRS tax levy varies depending on if you agree with the tax bill or disagree. In both cases, you need to make arrangements with the IRS as soon as possible. Here are the options to consider if you’re trying to remove an IRS levy. 

How to Stop the IRS Levy If You Agree With the Tax Bill

If you don’t contest (disagree with) the tax bill, the best way to remove the levy is to pay the past due amount. This doesn’t necessarily mean that you need to cut a check for the full bill. The IRS may be willing to remove the levy if you make other arrangements on your account. Here are the main options.

1. Pay the Tax Debt in Full.

As soon as you pay the tax liability in full, the IRS stops all collection activity including levies. To make a full payment, some taxpayers take out a loan, borrow money from friends or family, cash out life insurance policies, or dip into their retirement accounts. 

If you can pay in full but just need a little time, talk with an IRS agent. If your plan sounds reasonable, they may be able to stop the levy until you make the payment. 

2. Set up an Installment Agreement.

If you enter into an installment agreement with the IRS, the agency will stop the levy. In most cases, you can take up to six years to make monthly payments on up to $50,000 of tax liability, and under the expanded criteria, you can actually make payments for seven years on up to $100,000. If you haven’t been contacted by an IRS agent yet, you may even be able to set up a streamlined payment agreement on up to $250,000 of tax liability.

3. Submit an Offer in Compromise.

An offer in compromise is when you pay less than you owe, and the IRS forgives the rest of the liability. If you request an offer in compromise before the levy starts, that will stop the levy. If the levy is already in place, you can’t stop it by applying for an offer in compromise. 

However, if the IRS accepts your offer and you make the payment, all collection activity will stop at that point. There are some situations where the IRS will consider your circumstances when determining whether to keep or release a wage garnishment while the offer is pending.

4. Set Up a Partial Payment Installment Agreement (PPIA).

With this payment agreement, you make monthly payments on part of your tax liability. The payments are structured so that some of the tax debt expires on the collection statute expiration date. Setting up a PPIA can help you avoid a levy. If the levy is already in place, the IRS may withdraw the levy if it accepts your payment plan proposal.

5. Get Currently Not Collectible Status.

Ideally, you should apply for uncollectible status before the IRS levies your assets. You have to share a lot of financial details to prove to the IRS that you can’t pay your tax liability. Currently not collectible is only a temporary status. The IRS reviews your account periodically to see if anything has changed. 

6. Explain the Levy Is Causing Financial Hardship

If the IRS levy is causing financial hardship, you can apply for hardship status, and the IRS will stop the levy. This applies in cases where the levy is creating an immediate economic hardship, and you can’t afford to meet your basic living expenses. If the IRS removes the levy due to hardship, you still owe the money, and you have to make other arrangements. Otherwise, you risk facing additional levies. 

7. Prove Your Assets Have No Equity.

If the IRS is levying assets that have no equity, you can stop the levy by proving that fact. For instance, if you owe $200,000 on your house and it’s only worth $205,000, you can convince the IRS that it isn’t worth the time and effort to levy that asset. 

Keep in mind that when the IRS seizes assets, it subtracts the cost of the seizure and the sale from the proceeds. So even if there were some equity in your home or another asset, it might not be enough to cover the cost of seizing and auctioning off the asset. If you can prove this fact to the IRS, the agency may be willing to remove the levy. 

8. File Bankruptcy

If you file bankruptcy, the courts issue a stay, and that stops the levy. However, most tax liabilities cannot get discharged in bankruptcy, and the IRS can start collection activity at the end of the process.

9. Prove That Releasing the Levy Will Help You Pay the Tax Debt

In some cases, a levy may prevent you from paying back the tax liability. To give you an example, imagine that the IRS is levying the funds in your bank account, but if you were able to use those funds to buy inventory for your business, you’d be able to pay the IRS back the tax debt even faster. Then, the IRS might release the levy.

Or here’s another example, say that the IRS is levying your paycheck. You want to get a side job driving for a rideshare company so that you can pay off your tax bill, but you can’t afford the upfront gas cost unless the IRS releases the wage levy. If you can convince the IRS that stopping the wage garnishment will get you back into compliance faster, the agency may lift the levy. 

Note that these are very rudimentary examples to show you the type of argument the IRS considers. The IRS may not be willing to entertain either of these options. They are purely for illustrative purposes. They do not reflect actual IRS levy release processes. 

10. Show that the IRS Is Levying Exempt Assets. 

The IRS has a lot of power to levy a wide variety of assets, but it does not have the right to take everything. For instance, certain funds in your bank account such as pensions from the Railroad Retirement Act are exempt from levy. If you can show that the IRS took funds it wasn’t allowed to, the agency will release the levy. 

The IRS also cannot take things that don’t belong to you. For instance, say that you are a signer on a relative’s account and the IRS puts a levy on that account. The IRS must release the levy if you can show that you don’t own the funds or use the account. 

How to Stop an IRS Levy When You Don’t Agree With It

If you don’t agree with the levy, you need to take a different approach to levy removal. However, the approach varies based on why you don’t agree with the levy. Here are the main options.

1. Appeal the Tax Levy.

You can appeal the levy if the IRS did not follow the correct protocol, if you already paid the tax liability, or in a few other situations. To be effective, you should appeal within 30 days of receiving your final notice of intent to levy, but you can appeal after that as well. 

If you appeal after the IRS has seized and sold your asset, you may even be able to get a refund, but this can be a complicated process. You should work with a tax professional if possible. Do not use the appeals process as a stalling tactic. The IRS imposes harsh penalties for that.

2. Apply for OIC Doubt as to Liability.

If you believe that you do not owe the tax that is underlying the levy, you may be able to take advantage of this program. Usually, the OIC program is for people who can’t afford to pay their tax debt, but when you apply based on doubt as to liability, the IRS looks at whether or not you actually owe the tax. 

Establishing doubt as to liability can be complicated, and in most cases, you need to apply for another type of tax resolution program first. However, if you get accepted and you pay the offer, the IRS will release the levy. 

5. Claim Identity Theft If Applicable.

If the levy is due to identity theft, you need to contact the IRS to stop the levy. For example, if someone who wasn’t legally allowed to work in the country stole your Social Security number and used it to work, the IRS may have assessed a tax liability against you. Then, if you didn’t know about the tax debt, a levy may have happened. 

If you can prove that the levy was not supposed to be for you, the IRS will release it. As soon as you realize the identity theft happened, complete IRS Form 14039 (Identity Theft Affidavit). You can also contact the IRS directly at 1-800-908-4490.

6. Apply for Innocent Spouse Relief

If the tax liability is exclusively related to your spouse or ex-spouse, you may qualify for innocent spouse relief. To apply, file Form 8857 (Request for Innocent Spouse Relief). You can use one form for multiple years. 

If you qualify, the IRS will relieve you of the obligation to pay for the tax debt that was due to your spouse or ex-spouse’s actions. Then, if you pay the amount that you’re still responsible for, the IRS will remove the levy. Unfortunately, the IRS has to contact your spouse or ex-spouse, even if you are a domestic violence victim, but the agency will not give your personal details to that individual.

What Is an IRS Levy Release?

A levy release is when the IRS removes a tax levy that has been placed against you. For instance, if you convince the IRS to remove the tax levy, the agency may stop tax levies such as garnishing your wages or seizing your bank account.

It is easier to avoid a levy than it is to get it released. Ideally, you should take action before the IRS resorts to using tax levies. 

How to Stop IRS Garnishment: IRS Wage Levy Release

The most popular IRS levy is a wage garnishment. The IRS can take a significant portion of your wages if it decides to levy you. The agency only has to leave you with enough money to live on, and in most cases, the IRS’s idea of necessary living costs is much lower than what people actually spend. As a result, wage garnishments can be very financially stressful, but you can get a wage levy stopped if you know what to do. 

What to Do If the IRS Levies Your Bank Account

The second most common IRS levy is a bank levy. The IRS can seize all of the funds in your bank account up to the amount that you owe in back taxes, interest, and penalties. When the IRS contacts your bank, the bank will put a 21-day hold on the funds. If you have outstanding checks or automatic payments, you will need to deposit more money to cover them. Otherwise, they will overdraw your account or bounce.

Once the 21 days have passed, the bank will send the money to the IRS once the 21 days. The garnishment will only apply to funds that are in your account when the bank receives the notice. It will not apply to any new deposits unless the IRS sends another levy. If you want to release a bank levy, you need to act quickly before the 21 days are up. 

Can a Levy Be Reversed?

The best option is to avoid a levy. When you receive the notice of intent to levy, respond quickly. Try to set up a payment plan or appeal if applicable in your situation. The final notice of intent to levy will explain some of your options, but ideally, you should reach out to a tax professional when you receive this letter.

Make arrangements to take care of your tax debt before the IRS levies your assets. However, once a levy is in place, you can apply to have it removed. If the IRS seizes your assets and sells them, you usually can’t get the assets back, but you may be able to get a refund. 

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Tax Relief Process

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