How to Release or Remove an IRS Tax Levy: Stop IRS Levy
Ways To Remove or Release A Tax LevyOnce you receive a notice of intent to levy from the IRS you will have thirty days until the IRS will begin seizing assets. The IRS will then continue to seize your assets until the money received from those assets covers your tax bill plus all subsequent penalties and interest. On a positive note, know that the intent of the levy is to make unresponsive tax payers pay their taxes owed. So, the IRS will still accept different forms of agreements and the levy will be stopped. Below are ways to remove a tax levy:
- Pay the Tax Amount in Full, Including Penalties and Interest Once the total amount of tax owed is paid in full the levy and seizure of assets will immediately stop and the IRS will halt all collection activities. Some options to look into to pay the tax amount in full could be to take out a loan, refinance and take the equity out of your home, borrow the money on credit, or borrow from family or friends. If you feel like you have options of getting the amount to pay in full to the IRS and you just need some time to do it, you can talk to the IRS collector and tell him the way in which you plan to pay and if it sounds reasonable to him, he may just stop collections for a period until you can get the cash together in the amount of time you agreed upon with him.
- Enter Into an Installment Agreement If you owe $25,000 or less, once you formally enter into an installment agreement with the IRS and have a payment plan set up, the IRS will generally remove the tax levy.
- Setup a Partial Payment Agreement This is similar to the installment agreement, however with this method you will be able to make smaller payments than you would with the installment agreement and the total amount paid is normally less than the original tax amount owed. With this type of payment agreement, you must be able to show that you don’t have the means to make the payments required with an installment agreement.
- Submit an Offer in Compromise When you submit an offer in compromise it necessarily won’t remove a tax levy that was in place before the offer was submitted. However, if the levy is not in place it can halt on collection actions until the offer is reviewed and accepted or rejected. If the offer is accepted you will have to pay the amount of the offer and the levy will be released. If the offer is rejected collection actions will start again if you do not set up another type of payment agreement.
- Prove to the IRS that the Levy Causes Financial Hardship If you can prove that the levy is causing financial hardship and the IRS will have a better chance of collecting if the levy is released, then the IRS will release the levy. You must be able to show that you can barely afford to keep a roof over your head or put food on the table for your family. The IRS is the final determining factor in this and there are no real clear guidelines on what exactly would make you qualify in the eyes of the IRS as having “hardship”.
- Prove That Your Assets Have No Equity The IRS may try to levy assets that have no equity in them and there would be no point to this because the IRS would gain no money from this and there would be no money to put towards taxes that you owe. Say you bought your home for $200K and you have outstanding loans on it for $190K, now with the recent housing market downturn your house is only worth $190K and you outstanding loans just about equal the home so you have no equity. The IRS cannot take money from the mortgage company so if the IRS levied the house, they would gain nothing and you would be without a house. Sometimes the collector many not see this and you will have to prove it to him and maybe escalate it to his manager.
- Let the Statute of Limitations Expire The IRS has 10 years to collect taxes owed from the date of the original assessment. When this 10 year period is up, the IRS can no longer collect for those tax amounts. The IRS will try to extend the statute of limitations as the 10 year mark is coming close by having you sign for a payment plan or some other sort of agreement. If 9 years have passed, it is highly unlikely that the IRS will ever collect the amounts owed.
- Appeal the Tax Levy You are allowed to file an appeal for the tax levy if you think that the IRS was unfair or did not follow procedures. To appeal a tax levy you can either call the IRS or write a letter and request an appeal hearing. This method must not be used to delay because the IRS can impose penalties up to $25,000 if it is found you used this method for delay or stance is frivolous or groundless.
- Post a Bond
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Once you post a bond the levy will no longer be in effect. It is highly unlikely that you will be able to post a bond if you are in a situation with a levy because if you are able to qualify for the bond, it is likely that you would be able to pay the tax amount off in full.
Filing for Bankruptcy will generally release a tax levy because an “Automatic Stay” comes into place which means that all creditors have to halt collections efforts, including the IRS. In some cases, the IRS can get a stay removed by a Judge, but it is rare.