How to Stop an IRS Tax Levy: Preventing a Federal Tax Levy
If you have received a notice of intent to levy or know there is a possibility of a levy taking effect in the near future it is important you act soon to prevent the IRS from seizing any assets. One important thing to understand is that the IRS does not want to levy anyone's assets, this is a last resort collection mechanism used by the IRS. The purpose of a levy is to scare uncooperative tax payers into paying or forcibly making them pay, so if you cooperate with the IRS, even if you can't pay, it is possible to stop a levy from happening.
Ways to Stop a Levy
There are many ways to prevent a levy. The choice you use should be determined by the tax situation and your financial well being. For some people the threat of a levy could be a mistake made by the IRS, for others they have neglected IRS notices or just simply could not come up with the funds to pay the tax debt owed. It is important to find the best solution for your unique situation.
The IRS states that if you don't pay your taxes or make arrangements to settle your tax debt then they may seize assets. Below are some methods that can be used to pay the IRS or settle the taxes owed.
- Pay IRS in Full
This is the most obvious way to stop the tax levy. Once you pay the IRS in full they will stop any collection actions and will no longer consider the levy. If you don't have the funds to pay in full you can consider borrowing from friends and family, selling some assets, paying on credit card or sell some financial assets. If having to sell assets or borrow would still cause serious financial strain it is a good idea to consider other options.
- Installment Agreement
An installment agreement is the most common form of tax settlement. With an installment agreement you will be allowed to pay the taxes off over a period of time, up to three years, in monthly increments. Once you enter into this agreement you will be considered in good standing with the IRS as long as you keep up on the required monthly payments. One thing to note about this form of settlement is that you do stop penalties from accruing but interest will still continue to accrue on the balance of taxes that is still outstanding.
- Offer in Compromise
This settlement method allows the taxpayer to settle their tax debt owed for less than the total amount. This option is only available to those taxpayers that meet a strict set of requirements and can prove to the IRS that it would cause serious financial burden by collection the taxes or even if they uses forced collection mechanisms they won't collect more than the amount made in the offer.
- Innocent Spouse Relief
This is an extremely rare form of tax settlement and will likely only apply to very few people. When individuals file a joint tax return, each spouse is equally liable for all taxes owed. Innocent spouse relief is a way to place full tax liability on one spouse or separate out what is owed by each spouse. The IRS has strict requirements for this type of relief and is only available to those that have filed jointly.
Above are the ways you can prevent the levy if you agree that you owe the tax amount they stated but you just have not paid. If you don't agree with the levy it is another story and you will have to go about stopping the levy in a different manner.
- Appealing the Notice of Levy
At times the IRS does make mistakes in issuing levies to people that should not receive them. If you believe that the notice has been issued in error it is important to both call the IRS and file for an appeal. You may be able to resolve your problems by calling the phone number listed on the notice of levy. A phone call however is not an official appeal, so it is a good idea to file for an appeal as well and you can cancel your hearing later on if everything does end up getting resolved. There are many reasons you can file for an appeal and it is your consitutuional right to be able to have a hearing.
If you are at risk of a levy it is very important to take action immediately. This is an extremely harsh IRS collection mechanism and can severely hurt anyone financially. The IRS will not impose a levy if you cooperate. It is highly suggested that if you are in this position you hire a tax relief professional to help resolve your problem since they can act quick and know the ins and outs of the IRS.