How to Release an IRS Levy: Remove Federal Tax Levy

release tax levyOnce the IRS sends you their final notice of intent to levy and 30 days have passed and you have not taken any actions to rectify the situation, the IRS will begin to levy. The levy will remain in place until the IRS has levied enough assets to satisfy the outstanding tax liability or you have made another arrangement to settle your tax debt. Know that the IRS does not like to levy and would much rather settle in another manner, even if that means allowing the taxpayer to settle for less than they actually owe. Below are ways you can release the tax levy. The method you choose should be determined by how far along you are in the collection process, your tax situation, and your financial situation.

  • Stop IRS Tax Levy

    If you have just received a notice of intent to levy and the 30 days have not yet passed since you received the notice then you will have a few different options than someone that already has a levy in effect. One of the big differences is you will have the chance to appeal the levy prior to it going into place. Typically most taxpayers are able to prevent the levy from happening by either appealing the levy, paying in full or coming up with a different settlement agreement with the IRS. Just the threat of the IRS saying they will noticeably take a taxpayers assets make most come to some other form of agreement with the IRS.

  • Pay the IRS in Full

    This is the most obvious way to stop the IRS levy. Once the amount plus interest and penalties has been received by the IRS they will stop their collection efforts and put you back into good standing with them. Typically most people get into the situation of a tax levy because they cannot pay their taxes. The IRS does offer other ways to settle taxes other than paying in full.

  • File for an Offer in Compromise

    When the IRS mentions “make alternative arrangements to pay” in their final notice of intent to levy, this is one method they are referring to. An offer in compromise allows taxpayers to settle taxes owed to the IRS for a fraction of the total amount. This may sound great, but it isn’t that easy to obtain. This is one of the more complex IRS tax filings and most of the time the successful offers have been completed by tax professionals on behalf of the taxpayer. The only taxpayers that would qualify for this are those that can prove the collection of the entire amount would cause severe financial burden to the taxpayer.

  • Enter into IRS Payment Plan

    This is another form of “alternative arrangements to pay”. Most taxpayers that cannot pay their taxes in full enter into a payment plan with the IRS. The most common for of payment plan is an installment agreement. With an installment agreement the IRS allows you to pay back the taxes you owe in monthly increments over a period up to three years. There are other payment options available but they are only available to those that don’t qualify for a standard installment agreement.

  • Expiration of Statute of Limitations

    The IRS has 10 years from the date of the assessment to collect the taxes. Once this period is up the IRS can no longer collect the taxes. So if by chance you had a levy in effect and the IRS was not able to collect everything in that 10 year period, they would have to remove the levy and stop collections actions. This is not an advisable solution because much time would be wasted avoiding and hiding from the IRS and it would be much easier to come to some other sort of agreement with the IRS. It is also very likely that the IRS will try to find some way to extend that statute of limitations if they know they are likely to expire.

  • Prove Levy Causes Financial Hardship

    If you prove to the IRS that the levy would cause financial hardship this will not get you back into good standing with the IRS but would temporarily pause collection actions. In order to stop the levy you would have to show to the IRS that if the enforced the levy it would cause severe financial hardship and you would be left with an amount of property that is less than the required amount to live. Once you prove hardship to the IRS you will be considered temporarily “Uncollectible”. They will temporarily pause collection actions and then reassess your situation at some point in the future.

  • Bankruptcy

    This is usually the option of last resort but nevertheless can get a tax levy released. When a taxpayer files for bankruptcy, automatically a “stay” or stop on collection activities results which applies to the IRS and other creditors.

When it comes to releasing a levy the most common and suggested methods are to pay in full, enter into an installment agreement, or to file for an offer in compromise. Out of all IRS matters a tax levy is the harshest and most serious collection mechanism out there. If you are being faced with a levy it is high suggested that you use a tax professional to help you get back on track with the IRS as soon as possible. Tax professionals know how the IRS and will be able to determine quickly what solution would be best for you.