Effective Ways to Release a Tax Levy

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 through 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.

Pay Off Your Tax Debt Completely

Levies have one intent: to authorize the IRS to collect the money 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.

Set Up an Installment Agreement

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 can also release 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, the user fee may be reduced to $52.

Enter an Offer in Compromise

Another way to release a tax levy is by filing an Offer in Compromise (OIC).

Learn more here

File a Collection Appeal Request or Collection Due Process

You may also file for a Collection Appeal Process or request a

Collection Due Process

hearing. This allows you to appeal a tax levy and may result in the levy being released while your appeal is being reviewed.

While some taxpayers represent themselves, those who seek representation by an attorney, certified public accountant, or enrolled agent typically experience a higher success rate.

The Collection Appeal Process usually results in quicker decisions than the Collection Due Process. However, the results of the Collection Appeal Process cannot be contested once a decision is made.

Prove Undue Hardship

The IRS may also release a levy if it is demonstrated that the levy would leave you without the funds necessary to provide basic living expenses. To do this, you must present financial information to the IRS that validates an undue hardship.

This information can be provided to an IRS representative by telephone, in person, or by filing an Offer in Compromise either online or through mailed documentation.

If you do not have the ability to pay at all, you may be placed in Currently Not Collectible (CNC) status. While you may remain in this status for an extended period, your financial situation will generally be reassessed each year.

If you remain in Currently Not Collectible status long term (generally up to 10 years), the statute of limitations may expire and your tax debt could be eliminated.

Work Out a Levy Release

It may also be possible to personally negotiate with a field agent to release your levy. Telephone IRS representatives typically do not have the authority to release levies, but field agents often do.

If you can prove to the IRS that a levy is preventing you from paying your tax debt or selling a valuable asset (such as property), you may request a release. In such situations, it is generally understood that some or all of the proceeds will be used to pay your tax liability.

Prove that the Statute of Limitations Has Expired

There is a limited timeframe in which the IRS is authorized to collect tax liabilities. If you can demonstrate that the statute of limitations expired before the IRS filed the tax levy, the levy may no longer be enforceable.

However, determining the statute of limitations can be complicated. Certain circumstances, such as extended time spent abroad, can pause or extend the limitation period. For this reason, determining whether the statute has expired should generally be handled by a tax professional.

File for Bankruptcy

When you file for Chapter 7 or Chapter 13 bankruptcy, most collection activities against you, including tax levies, are typically halted immediately.

Depending on your circumstances, some or all of your tax liability may be discharged. Experienced tax professionals, like the team at Five Stone Tax Advisers, can help you understand how bankruptcy may impact your tax situation.

Avoid Tax Levies if Possible

Although it is sometimes possible to have a tax levy released, avoiding a levy altogether is always the best option. The IRS is often willing to work with taxpayers, but maintaining communication is critical.

If your tax situation is complex or you are unsure about your options, give us a call. Our team of trusted and experienced tax professionals can help you work with the IRS and resolve your tax issues.