An IRS levy is a lawful seizure of your property by the IRS to satisfy a tax liability. It generally comes as either a bank levy or wage levy. Knowledge of which sort of levy is in effect is the first step in moving towards releasing it.
STEP #1 – Take a look at the Notice the IRS has sent.
The IRS sends the following types of notices before they issue a levy.
CP501 – This is a Reminder Notice that an individual has a balance due.
CP503 – This is a second Notice to let the recipient know immediate action is necessary.
CP504 – Final Notice that an IRS levy will be issued on certain assets if the balance due is not paid.
CP 297/90 – This notice is the final correspondence telling the individual that there continues to be a balance due and that the IRS intends to levy if the balance is not paid.
CP 91 – This Notice is to let the recipient know the IRS intends to levy on Social Security Benefits if the balance due is not paid.
CP 523 – This Notice is Intent to Levy on certain assets because the individual defaulted on the Installment Agreement.
The IRS may give the individual a Notice Of Intent To Levy in person, their place of business, their home or just mail it to the last known address on file.
If you have received one of these Notices, it is very important that you contact the IRS right away or have a representative before the IRS to contact them for you.
A wage levy is a continuous IRS levy where as a bank levy is a onetime levy effective only on the amount in the bank account the day the levy was presented to the bank. A levy on 1099 income is also a onetime levy effective only on the income due the taxpayer the day it was received. The bank must send the funds in the account, up to the balance due, to the IRS after 21 days unless the levy is released prior.
STEP #2 – Ways To Stop IRS Levy Action After It Has Been Placed.
Become compliant with all tax filings.
The IRS will demand that you be current and compliant with tax filing before releasing a levy.
The IRS will require that you be in compliance and current with any tax returns. The first step will be to find out if you have unfiled tax returns and prepare and file them as soon as possible.
Pay the liability immediately.
If you pay the tax liability due the IRS will stop IRS Levy action. A levy will stop when bankruptcy is filed.
If you are not filing for bankruptcy and cannot pay the balance due.
If you are not able to pay the balance off, then you may either set up an Installment Agreement or have the case put in a section 53 (hardship).
If the debt is under $25,000 the IRS will set up a streamline Installment Agreement where the balance is paid off over the course of 60 months.
If the balance is over $25,000, financial disclosure is required. It is also required if you cannot make the minimum payment required in an installment agreement or if you have a financial harship.
The IRS will require full financial disclosure of income/expenses and assets/liabilities. This is typically done on a 433A. Manager approval is also required for any agreement.
Hire A Tax Professional.
I always advise professional representation if you are required to reveal financial information. An knowledgeable professional will know how to work the tax laws to your benefit, what disclosures are legal and they can also usually speed up the process.
If the balance is under $25,000 and it is a streamline Installment Agreement that would depend on how comfortable the individual is with dealing with the IRS. I have listened to stories from individuals on how they were put on hold and transferred many times with no results, were asked to reveal certain assets to see if they could pay it off, were dealt with rudely and overall found the IRS very hard to deal with.