Release an IRS Tax Levy

How To Release an IRS Tax Levy

What to do if you receive an IRS Tax Levy Notice?

If you receive a final notice of intent to levy from the IRS, the agency can start seizing your assets in 30 days. The IRS can seize a variety of assets and they don’t state which assets they will levy. They generally will 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 wage garnishment. With his form of levy, the IRS can seize wages, commissions, and other income.
  • Bank Account Funds: The IRS can 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 levy before it starts.  The W Tax Group can show you how, but for additional research here are some of your options.

How to Stop the Levy If You Can Afford to Pay

1. Pay the Tax Amount 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. As of 2018, 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 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 stops. There are some situations where the IRS will consider your circumstances when determining to keep or release the 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 liability 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 you 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 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 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.

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.

8. File Bankruptcy

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

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

9. 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 notice, but you can appeal after that as well. Do not use the appeals process as a stalling tactic. The IRS imposes harsh penalties for that.

10. Claim Identity Theft

If the levy is due to identity theft, you need to contact the IRS to stop the levy. For example, if someone stole your social security number to work and the IRS assessed a tax liability, that is a case of identity theft. 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.

11. 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. 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.

Tax Relief Process

What is the Tax Relief Process

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