Federal Tax Levy: Steps to Resolution with the IRS

Every year, thousands of letters are sent out letting taxpayers know that the Internal Revenue Service means business. These letters (CP 90/CP 297), in consideration, are often referred to as an IRS Intent to Levy. A Federal Intent to Levy means that the IRS is going to try to recover or collect back taxes in a more coercive manner. This forceful collection method translates into the IRS either taking a good portion of your paycheck (referred to as Wage Garnishment) every month or seizing part of all of your bank account (called a bank account levy).

With regards to an IRS bank account levy, the IRS will typically seize whatever is needed for the repayment of your back taxes or unpaid taxes. They will begin by notifying your bank and having your bank hold or freeze funds for twenty-one days. After 21 days, your bank will send the funds to the Feds. Therefore, if you have received any type of notice from your bank or the IRS about your bank account being levied it is in your best interest to immediately deal with the situation before it’s too late. You will need to pursue a Federal Tax Levy Release and it most cases, a professional knows the forms and procedures to follow.

With a Wage Levy or IRS Wage Garnishment, the IRS will send notice of their intention to taking a part of your paycheck to your employer. Your employer MUST comply with the IRS under federal Law and make deductions from your wages as necessary. Strong professionals, like our firm’s partners, will in most cases be able to release wage garnishment in three to five days.

To release any levy, you or your professional will need to complete various forms. However, before anything is done you must be in compliance with the IRS. That means, that all tax returns that you have outstanding must be filed with the IRS before anything. Therefore, you need to know what years, if any, you did not file and make sure to complete the necessary tax forms.

1. Contact the IRS to see if you are in compliance (make sure to not disclose financial accounts or bank accounts etc as again the IRS will take advantage of every opportunity to seize your funds). An advantage of a professional here is he or she can call the IRS and shield you from questions the IRS agents are trained to ask. Knowing the limits here is important.
2. If you are are not in compliance, file the appropriate tax returns or have your IRS professional do them. In order to further penalties and interest, fax those returns to the IRS so you can immediately get into compliance with the IRS.
3. Once you’re in “compliance” with the IRS, the next step is to figure out a form of settling IRS taxes owed. Settlement can be paying less than you owe or just pertain to an IRS Payment Plan, such as an IRS Installment Agreement, whereby you obtain an agreement with the IRS that you will pay them over time instead of all at once. Settlement mechanisms, where you pay less than you owe, can also be pursued depending on where you stand financially. These “settle for less” methods pertain to a Partial Payment Installment Agreement (PPIA), an Offer In Compromise, getting declared Uncollectible and so on.
4. In conjunction with Step 3 above, you will need to work with your tax professional or fill out form 433-F (if your situation is being dealt with by the IRS Automated Collection System) or form 433A if you are dealing with a field agent. Form 433 is your Collection Information Statement. Form 433 will detail all your assets, income, liabilities, etc.

If you’ve been notified by the IRS, do something about it. It means the IRS has started their notorious automated process of collection and they will not subside until your back taxes are paid or you have an “agreement” of some type (discussed above) to repay them.  If you have been informed by the IRS of a tax levy, have had your bank account garnished or your wages, start by signing up for a free tax analysis by using the “get quote” form on the right. Our partners will call you, diagnose your situation, make recommendations and let you know the cost of utilizing our services at no obligation or cost to you. Our services are structured so that our services only make sense financially – i.e. we will save you more money and headache then if you tried to handle the situation on your own.