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What is an IRS Tax Levy?
When a taxpayer owes back taxes, the IRS can use several measures to satisfy the debt. One of those is an IRS tax levy. A tax levy allows the IRS to legally take your property. Typically, this will happen only after the following three conditions are met:
You were sent a tax bill for the amount owed (Notice and Demand for Payment);
You have ignored the bill or refuse to pay it; and
You received a Notice of Intent to Levy (CP90)
You may receive the Notice of Intent to Levy by certified or registered mail, or the IRS may deliver it in person. In general, the notice must be sent at least 30 days before the IRS will actually seize your property. If you fail to make arrangements to settle your tax debt, the IRS has the legal right to take any of the following as part of the tax levy:
Automobiles and boats
Homes and other real estate
Personal property (jewelry, artwork, etc.)
Bank accounts (bank levy)
Your wages (wage garnishment)
Tax refunds – federal, state and/or municipal
Other assets may be at risk from a tax levy, as well. In some cases, the IRS may levy your retirement accounts, life insurance, or even payments owed to you.
How to Stop an IRS Levy
If you’ve received a Notice of Intent to Levy, the quickest way to stop the IRS from seizing your assets is to pay your tax balance in full. This, of course, may not be possible for many taxpayers. Thankfully, there are other options for stopping an IRS tax levy.
Request an Installment Agreement
The IRS may agree to satisfy your tax debt through an installment agreement, which basically allows you to make monthly payments over time until the balance is paid. If approved, the IRS will release its tax levy on your property.
Submit an Offer in Compromise
You can negotiate with the IRS to settle your current tax debt for a lower amount through an Offer in Compromise (OIC). Just keep in mind that you’ll be required to pay off the agreed-upon amount within a specified time frame. Once your debt is paid, the levy will be released.
Prove Financial Hardship
Making a claim for financial hardship is another way to stop an IRS tax levy, but it’s not easy. You’ll need to provide financial documentation, such as bank statements and pay stubs, to show that the levy would create a severe financial strain. If approved, the IRS could place you in a “currently not collectible” status, which immediately stops all collections against you.
File an Appeal
Once you receive the Notice of Intent to Levy, you have 30 days to file an appeal. An appeal is appropriate if you feel the IRS has made an error in determining the debt owed, or you’ve already paid the debt. You could also file an appeal if you wish to make a spousal defense (Innocent Spouse Relief), or you were in bankruptcy proceedings when the notice went out. During the appeal proceedings, the IRS levy is on hold.
If the IRS is threatening you with a tax levy, don’t wait. Take action today to protect your assets. At Tax Defense Network, we’ve helped thousands find affordable solutions for their tax problems. We can help you, too!
