A IRS tax levy is the toughest collection tool in the IRS arsenal. An IRS tax levy means that the government has the right to seize your property and assets in payment for unpaid tax debt. Unlike a lien, a tax levy actually gives the IRS the right to take and sell your property to settle your debt. If you have been issued a tax levy, don’t give up: you can still settle your tax debt.
There are several ways you can remove an IRS levy:
- Pay the tax debt in full. Once the debt is paid, the IRS will immediate halt the collection process. If you don’t have the funds available to pay the entire debt, options might include taking out a loan, borrowing money from friends or family, or refinancing your home. The IRS agent might be willing to put a temporary hold on collection procedures if you have a reasonable plan for coming up with the money.
- Set up a payment plan. This may be the simplest and easiest option. If you owe less than $25,000 in back taxes, the IRS will typically stop the tax levy once you have agreed to an IRS payment plan.
- Set up a partial payment plan. Similar to the installment plan, in a partial payment plan you will agree to pay the IRS what you owe over time. The main difference is that your payments will be smaller than with the installment plan and you must be able to prove that you don’t have the financial resources to make the payments required under the installment plan.
- Submit a compromise offer. If you submit an offer in compromise the IRS will automatically halt collection proceedings until the offer is reviewed. If the offer is accepted, you must pay the amount of the offer. If the offer is rejected, the IRS will resume collection proceedings unless you can set up a payment agreement.
- Prove that the levy is causing undue financial hardship. The conditions on this are stringent and the IRS is the final judge. If you can prove that the levy is making it difficult to provide for your families basic needs such as food and shelter, the IRS will lift the levy.
- Prove that the IRS is trying to collect on assets with no equity. If you can show the IRS that it’s not worth their effort to collect, the IRS may lift the levy. This would only apply in situations where you have little or no equity in your assets, such as a home with a mortgage large enough to offset the selling price.
- Let the statute of limitations expire. There is a 10 year statute of limitations on IRS tax debt. If the 10 year limit is drawing near, the IRS may try to extend the time limit by getting you to agree to a payment plan or other settlement. If you are on year nine of the ten year period however, you may be able to let the statute of limitations expire without payment.