While serious, a tax levy isn’t necessarily unstoppable. You may be concerned if you’ve received an IRS levy notice. Taxpayers have a number of options when faced with the possibility of a levy. First, it’s important to file on time and pay all owed taxes if your goal is to avoid getting into levy territory. You may be able to file for an extension to file that will give you more time without incurring penalties if you’re concerned that you’re not going to make the tax deadline this year. However, you may already be past the point where the IRS is notifying you that it intends to come after your paycheck or assets to settle a debt that’s owed. When you owe unpaid taxes, the IRS will seize your property to cover the value of the taxes owed. This can include seizing assets, seizing bank accounts, and garnishing wages. The IRS will go around you to extract funds directly from banks and employers. This is where it becomes important to explore relief options that will allow you to resolve your debt in collaboration with the IRS. The first step is addressing the levy that’s in place to avoid some very disruptive and irreversible financial repercussions. Take a look at what a levy means for you, how to comply with the IRS, and options for relief that will allow you to stop an IRS tax levy.
What Happens When You Get a Tax Levy?
Tax levies never simply appear “out of the blue.” You will be notified by the IRS prior to the activation of a levy through a Notice and Demand for Payment that is followed by “final warnings” called the Final Notice of Intent to Levy and Notice of Your Right to a Hearing. It is important to act quickly once you receive these notices because the IRS will begin seizures of your paycheck or assets if you don’t work out a relief plan.
Many people underestimate just how comprehensive and intrusive the IRS’s ability to seize assets to settle a tax bill truly are. Typically, the IRS will place a 21-day freeze on your bank accounts once a levy is activated. This is a crucial period for taking action because the bank may send some or all of your funds to the IRS if you do not resolve the issue during this “freeze” period. Similarly, the IRS can demand that your employer redirects most of your wages to the IRS for as long as it takes for your tax debt to be paid off. Even your home and car could be in jeopardy once you’re at the levy stage of your relationship with your IRS.
Is a Tax Lien the Same as a Tax Levy?
Don’t confuse a tax levy with a tax lien. A lien is the IRS’s legal claim to your property. A levy is the actual seizure of that property. If possible, it is recommended that you take remediation actions while your account is still in the lien phase.
Can an IRS Tax Levy Be Stopped?
The best advice on how to stop a tax levy is to act now. The clock is ticking once the Final Notice of Intent to Levy arrives in your mailbox. Taxpayers have several options for entering into agreements with the IRS that will stop levies.
Pay Your Tax Bill in Full
If possible, pay your complete tax bill to stop a tax levy. A lump payment is the fastest way to get the IRS to stop collection activity. However, relief options do exist if you cannot come up with the funds all at once.
Request a Collection Due Process Hearing
Do you believe the IRS has made an error? It’s possible that you received a Notice of Intent to Levy based on an error or misunderstanding. You should never ignore a letter from the IRS just because you assume that it was sent in error. While you may be aware that you’re fully current will all tax payments, the IRS may have you on record as being delinquent with your payments. That means that the IRS will proceed as though you do owe money. Get this untangled as early as possible to avoid unnecessary headaches! You can request a hearing with the IRS Office of Appeals to make your case within 30 days of receiving a Notice of Intent to Levy letter. Due to the complexity and urgency of this strategy, it’s important to seek the help of a tax professional when requesting a hearing to appeal your levy.
Get an Installment Agreement (IA) Worked Out
An IRS Installment Agreement (IA) is the most common relief option for taxpayers facing tax levies due to unpaid taxes. Generally, the IRS is receptive to requests for payment plans. Typically, a taxpayer is given 72 months to pay off what they owe through an installment plan. When applying for an installment plan, you’ll be asked to provide proof that you have the funds or access to funding that will allow you to comply with the terms of your plan. You must also be able to prove that you are not currently capable of paying off your debt in full by providing bank records. Lastly, Installment Agreements are only granted to taxpayers who are current with all tax filings.
Request an Offer in Compromise (OIC)
For some taxpayers facing levies, an Offer in Compromise (OIC) is the best option. An OIC is a request to settle what you owe in taxes for less than the full amount owed to create a more manageable route to full repayment. The requirements for requesting an OIC are being current with all filed returns an agreeing to stay current with all future tax payments. OIC is not available if you are currently being audited or processing a bankruptcy. It’s so important to vet your chances of being accepted into the OIC program before submitting an application because the IRS accepts less than half of all requests for OICs each year.
Yes, bankruptcy is technically an option for stopping an IRS levy. This is a complex process that requires lots of consideration regarding the weight of your debt versus the consequences of bankruptcy. Talking with a tax professional about the pros and cons of bankruptcy versus other relief options is highly advised.
How Tax Group Center Can Help
Don’t put off taking action for even one more day if an IRS Notice of Intent to Levy has arrived in your mailbox. Many taxpayers lose more than they need to because they think that ignoring the problem will make it go away. Our team may be able to show you how to stop an IRS tax levy before any of your assets are frozen or seized. Each option available for stopping an IRS tax levy requires very specific steps. At Tax Group Center, we’ll work hard to help increase your chances of being accepted into an IRS relief program or having your appeal recognized by the IRS. Our team of tax professionals, lawyers, and accountants has been helping taxpayers get tax relief and comply with the IRS for 30 years. We help clients avoid IRS penalties effectively because we speak the language of the IRS. Reach out today to have a conversation about how you can stop a tax levy!