When you receive notification of a tax levy on your property, don’t panic. The IRS can release a levy if it determines that:
- You paid the amount you owe,
- The statute of limitations has expired before the levy was issued,
- Releasing the levy will enable you pay your taxes,
- You have entered an Installment Agreement which doesn’t allow the levy to continue,
- The value of your property is more than the amount owed and releasing the levy will not hinder its ability to collect the amount owed.
Therefore, there are several effective ways in which you can respond to a levy to stop it completely, or to limit its impact.
1. Request a levy release
On receiving the final notice, contact the IRS immediately to pay your tax debt, if you can, and request a levy release. If the IRS will not release the levy, you can appeal their decision before or after they have placed a levy on your bank account, wages or other property. If the levy proceeds have been sent to the IRS or the State, you are allowed to claim them back by filing a claim. If the tax agency denies your request to return your property to you, you are allowed to appeal that denial.
2. Claim you didn’t receive notification
You are not required to receive any notification before your account is frozen and this is one thing that is frustrating about the bank levy process. However, the tax agency is required to notify you when they seek a legal judgment that will enable them to levy your account. If you were not legally notified before the judgment was given, and you can prove this fact, you may be able to get the levy released.
3. Claim the Statute of Limitations
The IRS or the State tax office only has 10 years to collect taxes and can’t continue after that. Therefore, the first thing you must do is to research the age of your debt. If it is more than 10 years old, you may be able to stop the levy. However, submitting an offer in compromise or starting a payment plan can affect this 10-year window. Talk to Defense Tax Partners to make sure you understand your situation.
4. Submit an Offer in Compromise
If you can’t pay your debt because of your financial situation, you can make an offer in compromise so that you can settle your debt for less than what you owe. If this is approved, the levy will be released, and you can pay the balance according to the agreed payment plan. N.B. The IRS can continue to file the levy before your offer is approved but, once they approve, you can request them to stop the process.
5. File for bankruptcy
If other options haven’t worked, you can file for bankruptcy to eliminate a tax levy and some or all of your tax debt. Usually, a tax levy is released within 24 hours of filing for bankruptcy.