When the IRS issues a notice that it intends to levy and seize your assets you have 30 days to challenge the tax levy to attempt tax resolution or pay the amount due.
If you cannot pay the tax debt in full before the IRS is scheduled to seize your assets, you may be able to remove the tax levy anyway with proper tax resolution by setting up an installment plan with the IRS or by making other arrangements. But the best course of action is to work out a mutually agreeable solution with the IRS – and avoid the levy altogether.
Levies serve one purpose: to allow the IRS to collect the money that it is owed. Therefore, if you can raise the cash to pay your debt in full, including penalties and interest, within a reasonable period (up to 120 days), the IRS will release its levy immediately. Such agreements can be negotiated by telephone, in person or by mail.
You may negotiate an installment agreement by filing Form 9465, Installment Agreement Request, available through the IRS website. Negotiating an installment agreement also releases tax levies immediately.
The IRS charges a standard installment agreement user fee of $120 to establish an installment plan. Taxpayers who elect to pay installments through direct debit are charged an installment agreement user fee of $52.
The IRS may also release a levy if following through would deprive you of the means to provide for your basic necessities. You must generally provide financial information to the IRS in order to demonstrate undue hardship. You may provide such information to an IRS agent by telephone or in person or by filing an Offer in Compromise online or in hard copy form mailed to the IRS.
If you lack the means to pay at all, you may be placed in Currently Not Collectible status. You may remain in Currently Not Collectible Status indefinitely, but you must undergo reevaluation of your financial circumstances every year. If you remain in Currently Not Collectible Status long enough (generally 10 years), the statute of limitations may run out and your tax obligation would be forgiven.
You may also obtain a release of a tax levy by filing an Offer in Compromise (OIC).
You may be able to negotiate directly with a field agent to have your levy released. Telephone IRS agents generally do not have the authority to release levies, but field agents often do.
If you demonstrate to the IRS that you will be more likely to be able to pay the tax you owe or if you wish to sell real estate or some other valuable asset, but cannot do so while a levy is in place, you may request a release. In such cases, the understanding is that you will apply all or part of the proceeds of the sale to pay your overdue tax bill.
The Collection Due Process and the Collection Appeal Process allow you to appeal a tax levy, which releases the levy while your appeal is being considered. You may represent yourself or be represented by an attorney, a certified public accountant or individual who is enrolled to practice before the IRS. The Collection Appeal Process generally provides quicker decisions than the Collection Due Process, but you cannot dispute the results of the Collection Appeal Process in court.
Filing Chapter 7 or Chapter 13 bankruptcy immediately normally halts all collection action, including tax levies. Depending on your personal circumstances, some or your entire tax obligation may be eliminated with your discharge.
The IRS only is only allowed to pursue taxpayers for their tax obligations for a limited period of time. If you can demonstrate that the statute of limitations had expired before the IRS filed its tax levy, you are off the hook. But calculating the statute of limitations accurately can be tricky, because certain actions, such as spending extended periods outside the country, stop the clock on the statute of limitations. Determining whether the statute has run on your tax levy is a task definitely left to the experts.
While it’s possible to obtain a release of a tax levy, avoiding tax levies is a much better strategy. The IRS is willing to negotiate with taxpayers – the key is to maintain the lines of communication. And if your tax problem is complex, you don’t have to go it alone.