How to Stop an IRS Tax Levy

Finding out the Internal Revenue Service (IRS) plans to enforce a tax levy against you for back taxes or other tax debt can be scary. The IRS often has the legal right to seize or garnish wages, bank accounts, and other property. However, you have rights as a taxpayer, and there are several ways to stop the seizure of your assets and property.

If you’re facing a possible tax levy, you can proceed in several different ways. Tax relief tools to pause or stop the levy are frequently available. Your options will heavily depend on the circumstances. You’ll want to consult an experienced tax attorney who can help you understand possible courses of action in your specific situation.

In this article, we’ll review some of the ways you might respond to a potential IRS levy. But first, let’s make sure we understand what that is.

IRS Tax Levies

An IRS tax levy is a collection action to collect unpaid taxes. It refers to the IRS taking your property or assets to satisfy a federal tax debt. IRS tax levies can take several forms.

For example, you may have heard of wage garnishment or wage levy. This is a type of tax levy where your employer sends a portion of your earned wages directly to the IRS to satisfy your tax debt.

How Does a Tax Levy Occur?

If a taxpayer fails to pay their tax debt, the IRS will typically go through a series of steps.

After determining the balance due, the IRS will send you a tax bill explaining the amount you owe. This is called a "Notice and Demand for Payment."

You have several options for responding, but if you don't pay the amount due or make alternate arrangements, the IRS will send additional notices.

If you still haven't paid or otherwise resolved the matter with the IRS after receiving multiple notices, it usually files a federal tax lien against your property.

Tax Liens

A federal tax lien, or IRS tax lien, is the government's legal claim against your property if you fail to pay a tax debt. It’s distinct from a tax levy in that it’s a claim to your property rather than an actual seizure of it.

The lien alerts creditors that the IRS has a legal right to your property. If a lien goes unaddressed, the IRS may start to send you notices of intent to levy. If you still don't respond, it may ultimately send you a “Final Notice of Intent to Levy” and “Notice of Your Right to a Hearing.”

These IRS notices typically give you at least 30 days before the levy begins. Ideally, you would obtain tax help in this time window before the IRS imposes the levy.

What Can the IRS Take?

If you don't resolve the tax debt or respond to the final notice within the given timeframe, the IRS may enforce the levy. This can include seizure of:

• Personal/real property
• Bank accounts (bank levy)
• Social Security benefits
• Retirement Accounts

The IRS tax levy will continue until the debt is paid off, you reach an alternate resolution with the IRS, or the statute of limitations expires. The statute of limitations for collecting a tax debt usually expires ten years from the date the tax was assessed.

How To Stop the Levy

As soon as you receive a notice about a tax levy, time is of the essence to prevent the seizure of your assets and property. Obviously, the most direct way to do that is to pay the full amount due.

However, that may not be realistic or reasonable for you at this time. Even so, an experienced tax attorney can still help you stop the levy. Depending on the specifics of your situation, several options may be available.

Installment Agreements

An installment agreement is basically a repayment plan with the IRS. An attorney experienced in negotiating with the IRS can help you arrange a monthly payment plan that fits your budget and stops the levy.

Offer in Compromise

An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount owed. Obtaining an OIC can be a complicated process, but it often presents an appealing way to prevent the levy.

Financial Hardship

Financial hardship might be a suitable option for you if you can prove with compelling evidence that the levy would leave you unable to meet basic living expenses. To establish this, you will need to provide:

• Detailed explanation of your financial situation
• Evidence of your expenses, like proof of dependents
• Assurance you’re up to date with your income tax returns

If you can show the levy will cause you severe economic hardship, the IRS may reduce or pause the levy.

Pausing the levy for this reason puts the taxpayer in “Currently Not Collectible” (CNC) status. This will halt IRS collection activities for a specified period of time. Currently not collectible status doesn’t forgive the debt, but it does allow for temporary relief.

Appeals

Sometimes the IRS makes mistakes. If you believe the levy is unfair or incorrect, you can appeal it. If it’s still within the timeframe listed in your final notice, you can usually request something called a Collection Due Process (CDP) hearing. Your request will automatically suspend levy actions until the hearing is concluded.

During Collection Due Process hearings, taxpayers can dispute the tax liability, argue economic hardship, or propose alternate tax resolutions. A taxpayer can still appeal the hearing's outcome, which continues to prevent levy actions until resolved.

Getting Legal Advice

It’s never fun dealing with these types of tax issues. But a tax levy doesn’t have to upend your life. There are several ways to address the IRS notice and the levy itself. Your best course of action will depend heavily on the circumstances surrounding your tax debt.

An attorney who is well-versed in tax law can help you understand your options and guide you through a resolution of the tax problem. Your conversations will generally be protected by attorney-client privilege. This provides a higher level of confidentiality than with other tax professionals like Certified Public Accountants (CPAs) or enrolled agents.

Identifying the right attorney is key. Using Findlaw’s directory of dedicated tax attorneys, you can easily find a local expert who can help. You can narrow your search by state, city, reviews, and more.

Ensure you’re making informed decisions by enlisting a professional who can advocate for you.