How to Stop an IRS Levy
If you have received a notice of intent to levy or are worried that the IRS may be seizing your assets soon, you need to take action. Depending on your situation, you can set up a payment arrangement, seek other relief, or appeal in order to stop an IRS levy.
In most cases, as long as you reach out, the agency will work with you. Seizures are a last resort collection action, and ideally, the IRS would prefer to avoid them.
Ways to Stop an IRS Levy
There are several ways to stop the IRS from taking your assets. Ultimately, you need to choose a solution that works for your financial situation. Here are some arrangements the IRS is usually willing to accept. Remember, in almost all of these cases, you generally need to file all tax returns due.
Pay in Full
If you can afford to pay in full, this is the most effective way to stop a tax levy. To make a full payment, some taxpayers dip into savings, sell off assets, or borrow from friends or family. If you can find a loan with a lower interest rate than the IRS charges for penalties and interest, you may even want to take out a loan so that you can pay your taxes in full.
With an installment agreement, you make monthly payments to pay off your taxes over time. Generally, you have to complete the payments within an 84-month time period or less. Interest continues to accrue, but as long as you make payments on time, the IRS reduces the failure to pay penalty by 50%. Generally, taxpayers need to request the tax levy stop once an installment agreement is pending.
Partial Payment Installment Agreement
This is similar to a regular installment agreement except that you pay what you can afford on a monthly basis. The IRS will review your financial situation and determine what you can afford on a monthly basis. In most cases, collection activity will stop.
Offer in Compromise
This is when the IRS lets you pay off your tax owed for less than you owe. To qualify, you have to meet strict financial criteria. In particular, you need to prove that you wouldn’t be able to pay off the taxes through any other method. The IRS usually only accepts an offer in compromise if it believes there is no other way to get more money from you.
Innocent Spouse Relief
This is an extremely rare form of tax settlement. Usually, when you file a tax return with your spouse, you are jointly liable for the tax. However, if you can prove that you were “innocent” and not liable for the taxes owed, you may qualify for relief and avoid a tax levy. There are a number of qualifications you need to meet.
Currently Not Collectible (CNC Status)
This is when you prove to the IRS that you are facing financial hardship or if the IRS required you to pay, you would face financial hardship. The IRS allows for basic monthly living expenses. Therefore, if you cannot pay the IRS and meet basic living standards, then the IRS can place you into a CNC status. In most cases, once in this status, collection activity will stop. However, interest and penalties continue to accrue.
Prove Tax Identity Theft
This is where someone steals your identity to request a refund using erroneous deductions or credits. Moreover, someone can steal your identity and use it to collect 1099 income or W2 wage income in certain cases where the employer does not withhold taxes. If this is your situation, then you need to request identity theft and prove it.
If the form of levy you are experiencing is wage garnishment, there are some other alternatives to consider to stop the garnishment.
If the IRS agrees to any of the above arrangements, all collection activity will generally stop. Most importantly, the IRS will not seize any of your assets. However, these arrangements only apply in cases where you agree with the assessment. If you don’t think you owe the tax listed on your notice, you need to appeal.
How to Appeal the Intent to Levy
If you don’t agree with the information on the Final Notice of Intent to Levy (e.g. LT11 or LT1058), you can appeal it by requesting a Collection Due Process hearing by using Form 12153. Generally, you have to start this process within 30 days of receipt. Usually, the deadline is marked on the notice.
You should also call the IRS. In some cases, you may be able to resolve the issue over the phone but to be on the safe side, start the appeals process. The IRS cannot levy you while your appeal is pending. That way, if the phone call fixes the issue, you can cancel your appeal hearing, but if the phone call doesn’t fix the issue, you still have the hearing scheduled.
How to Get Help If the IRS Is Threatening to Levy Your Assets
If the IRS is threatening to levy your assets, you need to take action immediately. This is one of the harshest IRS collection methods, and it can really hurt you financially. You may want to hire a tax relief professional (EA, CPA, Tax Attorney) to help resolve your issue. It is important to make sure they are well versed with tax resolution as it is very specialized. They know the ins and outs of the IRS and can act quickly on your behalf. The pros on this page are the top-rated pros in dealing with tax levies, consider reaching out to one of them to help with your problems. Or you can start a search below and select the applicable agency/agencies and filter by the problem or solution you are seeking.