Has the IRS levied your assets, bringing your daily life to a screeching halt? It’s a stressful situation, but there is still hope. The IRS wants to collect as much as they can from taxpayers without causing so much hardship they can’t afford basic living expenses. That means they’re often willing to work out an arrangement. How can you make that happen? Here’s what you need to know about how to remove an IRS levy.
What is an IRS levy?
An IRS tax levy allows for the legal seizure of a person’s assets to cover their unpaid taxes. These assets can include bank accounts, wages, personal property, real estate, and vehicles. While a lien is a claim to a person’s assets, a levy gives the IRS the power to take possession of them.
The IRS uses a stick and carrot approach with taxpayers. Tax relief programs, such as offers in compromise and installment agreements, are the carrot. They encourage taxpayers to pay as much of their tax debt as possible without causing undue hardship. Tax liens and levies are the stick that provides taxpayers with an additional incentive to repay their taxes.
The good news is that in the last 10 years the IRS has reduced the number of liens and levies filed. This has not affected the IRS’s ability to collect taxes. On the contrary, the IRS’ collection yield has increased dramatically. However, that’s little comfort if you have been hit with an IRS levy.
How to stop an IRS levy
If you begin receiving notices about an IRS levy, you can stop the proceedings by getting in touch with the IRS as soon as possible. Make contact and work out an agreement. Even if you can’t pay and feel like there’s nothing you can do, it’s better to get in touch. There are many tax relief programs to help taxpayers who are unable to pay their full debt load. For example, you could try the following:
- Set up an installment plan. An installment plan is an agreement to repay your tax debt in an extended timeframe of up to six years. Agreeing to the plan will halt other collection activities, like a lien or levy.
- Submit an offer in compromise. When you can’t afford to pay a tax debt in full, you can make an offer to the IRS to pay as much as possible. When you do so, collection activities will pause. However, if the offer is declined, they will resume, and you will have to make another arrangement.
- Currently not collectible status (CNC). If you are going through a hard time financially and can prove it to the IRS, they may put you on this status, which temporarily pauses collection efforts. You will need to prove that it’s not worth the effort to collect.
When facing an impending levy, get in touch sooner rather than later. If you work with any of the above programs, the IRS may remove the levy.
How do you release a levy?
Once the IRS has placed a levy on your bank account, wages, or other property, you need to get in contact immediately to request a levy release. The IRS may release you from the levy for any of the following reasons:
- The levy prevents you from meeting your basic necessary living expenses.
- You already paid the amount in full.
- The statute of limitations on the debt has expired.
- Releasing the levy will enable you to pay the amount owed.
- You agreed to an installment arrangement.
- The amount collected is more than the amount you owe.
If your request is denied, you can appeal it. You can also file claims to have your property, or other assets returned to you.
If the levy is released, but you still owe the amount due, you must make arrangements to pay it.
What can the IRS levy?
The IRS can levy everything a person owns or earns. This includes wages, money in bank accounts, retirement funds, vehicles, boats, real estate, tax refunds, and anything else that could be liquidated for value.
How long does an IRS bank levy last?
How long does a levy last? It lasts until you pay the total amount owed, or until you come to another agreement with the IRS. It is possible to get a levy removed in the time it takes to call the IRS and come to a payment extension agreement.
With a bank levy, for example, the IRS will freeze the funds in your bank account for 21 days before taking them. But if you call the IRS and make an agreement before this time is up, you’ll immediately regain access to the funds.
However, some agreements take longer than others. If your situation is complicated and you need to provide extensive documentation, it can take months to get the levy released.
It’s best to contact the IRS right away and see what your options are. Also, consider hiring a tax professional to do so on your behalf.
Can the IRS take your whole paycheck?
Unfortunately, yes, the IRS can take your whole paycheck. However, it should never be a surprise. This only happens to taxpayers who owe back taxes and failed to respond to a series of persistent notices, including:
- Demands for payment (CP501, CP503, CP14).
- Intent to levy (CP504).
- Right to Collection Due Process (CDP) (LT11, Letter 1058).
The IRS may also issue a levy on your wages. When they do, they’ll contact your employer and request part of your paycheck. You can review the amount exempt from the levy here.
Get help from a tax expert
Owing money to the IRS is never fun. When you start hearing about tax levies, the problem is about to become seriously disruptive to your life. Hiring a tax relief expert can take some of the stress out of the situation while helping you to get the best results. When facing the IRS alone, you are at a disadvantage. The best tax relief companies have tax lawyers and enrolled agents on staff, provide a money-back guarantee and charge competitive rates. Check out which tax relief company is the best fit for you.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.