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How to Release or Remove an IRS Tax Levy
If you have received in the mail a notice describing the IRS’ intent to levy, you have thirty days to do something, and when those thirty days are over, the IRS begins with the seizure of your assets. The IRS will continue the procedure of seizing assets until they have acquired enough to cover what you owed in tax debt, including all incurred penalties and interest. It is important to note that the IRS sends these letters to unresponsive taxpayers in an effort to make them pay their owed back taxes. That is why there is a thirty day period to do something before the levy begins. There are different types of agreements the IRS will accept to stop the levy. Given below is a list of some of the most prominent ways to stop an IRS tax levy.
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Pay the full tax amount owed in one payment, including interest and penalties
If you choose to pay the total tax debt amount in full, the IRS will immediately stop all seizure of assets action and all collection activities will come to a halt. If you want to pay the total amount at once, yet do not have the personal finances to do so, you can look into getting a loan, refinancing your home to get an equity loan, receive money through credit, or ask family and friends to borrow the money. If you believe you have the capability to get the money together to pay the IRS in full, but you need more time to gather the necessary funds, speak directly to an IRS collector. You need to explain how you plan to get the money and why it will take longer. If the IRS collector believes this to be a reasonable request, he will delay the collection process for you to have enough time to get the money together.
Apply for an installment agreement
The tax levy on your property will be removed if you speak to the IRS in an effort to set up an installment agreement.
Set up a partial payment agreement
Though the partial payment agreement is comparable to an installment agreement because you are making the monthly payment, there are differences. With a partial payment agreement, the payments are smaller and the total sum paid is going to be below the original amount of back taxes owed. To qualify for a partial payment agreement, you need to be able to prove that you do not have the necessary funds to make the required payments that exist with an installment agreement.
Present an offer in compromise
Collection actions are halted if you decide to suggest an offer in compromise. The IRS then decides if this offer is to be rejected or accepted. If your offer is accepted by the IRS, you are required to pay the total amount that you offered to get the levy released. If the IRS rejects the offer, collection actions resume unless another payment option is discussed.
Establish that placing a tax levy will cause financial hardship
The IRS will get rid of the levy ii you can successfully prove the levy is causing you to suffer financial hardship, and you will be better equipped to pay off the tax debt owed if the IRS releases the levy. However, you need to be able to demonstrate that the levy is making it extremely difficult to provide even basic necessities, such as food and shelter. There are no guidelines set up by the IRS on what qualifies as a financial hardship and it is instead looked at as a case-by-case situation where the IRS makes the final decision.
Confirm that your current assets have no equity
You can argue that certain assets you own have no equity, and therefore it would be fruitless for the IRS to levy those assets because no money would be gained from them to put towards the back taxes you owe. For example, when you purchased your home, it was worth $200 K. Currently, you have taken out numerous loans on your home, to the amount of $190 K, and all these loans are currently outstanding and left you without any equity. Because of the housing market downturn, it has left your home worth only $190 K. If the IRS chooses to levy your house, they will not be able to take funds from the mortgage lender, and would, therefore, not gain anything, plus, you would no longer have a home. However, on most occasions, an IRS collector would not notice this and you would have to prove this to him.
Allow the statute of limitations to expire
From the date of the first IRS tax assessment, they have ten years to take any necessary steps to collect owed taxes. When the ten year period expires, the IRS is no longer able to collect these tax amounts. There are ways the IRS may attempt to extend the time-frame of the statute of limitations past the original ten-year mark. They will try to get you to sign up for a payment plan or another agreement. However, even the IRS knows that if the nine-year mark has passed and they have not collected from you, it is very unlikely that they will get the amount they are owed at any point.
Appeal the tax levy
If you believe that the IRS was wrong in placing a tax levy on your assets, you can file for an appeal. To start the appeal process, you need to either speak with an IRS agent directly or submit a letter that requests to have an appeal hearing. It is cautioned that you should not use this method to delay paying the IRS. The IRS is allowed to impose up to $25 K in penalties if they discover that you used the appeal method only to delay and your appeal reasons are groundless.
Post a bond
If you choose to post a bond, the tax levy will be removed. However, this is a very unlikely scenario because if you demonstrate the ability to get a bond posted, it means that you are capable of paying the total tax debt in full.
Tax levy help.
If you need assistance with an IRS tax levy, you may seek the help of a professional tax specialist. They are able to provide you with details on the best options for removing the levy.