If you receive a notice of intent to levy and you cannot pay the tax debt in full before the IRS is scheduled to seize your assets, you may be able to remove the tax levy with proper tax resolution (such as setting up an installment plan). However, the best course of action is to work out a mutually agreeable solution with the IRS and avoid the levy altogether.
Levies have one intent: to authorize the IRS to collect the money that it is owed. Therefore, if you can gather the money to pay your debt in full (including penalties and interest) within an acceptable timeframe (up to 120 days), the IRS will release its levy right away. These agreements can be negotiated by phone, mail, or in person.
If you cannot pay your debt in full, you may negotiate an Installment Agreement by filing Form 9465, Installment Agreement Request. Negotiating an installment agreement also releases tax levies right away.
The IRS imposes a basic installment agreement user fee of $120 to establish an installment plan. However, if you choose to pay installments through direct debit, your installment agreement user fee reduces to $52.
Another way to release a tax levy is by filing an Offer in Compromise (OIC). Learn more here.
You may also file for a Collection Appeal Process or a Collection Due Process hearing, which allows you to appeal a tax levy and releases the levy while your appeal is being examined. While some taxpayers represent themselves, those who seek representation by an attorney, a certified public accountant, or individual who is enrolled to practice before the IRS typically have a higher success rate.
The Collection Appeal Process usually results in quicker decisions than the Collection Due Process, however you cannot contest the results of the Collection Appeal Process.
The IRS may also release a levy if demonstrated that the levy would deplete you of the necessary money needed to provide everyday essentials. To do this, you’ll need to present financial information to the IRS that validates an undue hardship. You can provide this information to an IRS representative by telephone, in person, or by filing an Offer in Compromise (either online or in hard copy mailed to the IRS).
If you do not have the money to pay at all, you may be placed in Currently Not Collectible status. You may stay in Currently Not Collectible Status indefinitely, however your financial situation must be reassessed every year. If you stay in Currently Not Collectible Status long-term (generally 10 years), the statute of limitations may expire and your tax debt would be erased.
It’s also possible that you can personally negotiate with a field agent to release your levy. Telephone IRS representatives typically do not have the power to release levies, but field agents generally do.
If you can prove to the IRS that having a levy placed against you is hindering you from either paying your tax debt or selling a valuable asset (such as property), you may request a release. In this situation, it is understood that you will use all or part of the profit to pay your tax liability.
There is a restricted time frame that the IRS is authorized to go after taxpayers for their tax liability. If you can prove that the statute of limitations expired before the IRS filed its tax levy, you’re in the clear.
However, determining the statute of limitations precisely can be complicated since certain actions, like spending lengthy periods of time abroad, put a pause on the statute of limitations. Figuring out whether or not the statute has expired on your tax levy should be left to a tax professional.
When you file for Chapter 7 or Chapter 13 bankruptcy, all collection activities against you, including tax levies, are typically stopped immediately. Depending on your situation, some or all of your tax liability may be erased with your discharge. Tax professionals, like the experienced team at Five Stone Tax Advisers, can help you better understand how filing for bankruptcy impacts your tax liability.
Although it’s possible to have a tax levy released, avoiding tax levies all together is your best bet. While the IRS is prepared to work with taxpayers, it’s vital to continuously cultivate communication. If your tax issue is difficult or you are confused about your options, give us a call. Our team of trusted, experienced tax professionals are happy to help you work with the IRS and resolve your tax problems.
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