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If your bank account or other assets are being seized by the IRS, there are options you can take. Here’s how to stop an IRS tax levy fast. Ignoring the IRS is never a good idea. If you thought a tax lien was scary, that’s just the beginning. 

How to stop an IRS levy?

When it comes time to collect taxes, the IRS has another trick up its sleeve. It’s called an IRS levy. A IRS tax levy is different from a lien. With a lien, the IRS puts a legal claim against your property. But an IRS levy notice, it’s much more severe. An IRS levy  notice is when the IRS actually takes your property to satisfy a tax debt. You could lose the cash in your bank account, your vehicles, personal property, and even your house.

What Is An IRS Levy Notice ?

An IRS levy notice sounds alarming. And it is. But it isn’t the first step to collecting back taxes. By the time you get a Final Notice of Intent to Levy, it shouldn’t be a surprise. “Usually, the IRS will reach out to you for months and months before issuing a levy,” said Sharif Muhammad, MBA, CPA, PFS, MST, and CFP®, and founder and CEO of Unlimited Financial Services, LLC.

If you haven’t paid your taxes or made any arrangements to take care of your bill, the IRS can take action. How do they do it?

After notifying you of their intent to levy, “the IRS works directly with the legal department to seize your assets,” said Muhammad. “An IRS levy letter can be in the works for days by the time you realize what’s happening.”

That can put you in a tricky situation. You might try to make a withdrawal or pay a bill with your bank account and suddenly not have access to your money. Or the IRS might show up on your doorstep and start removing your belongings.

How to Stop an IRS Tax Levy Notice

You already know the IRS is powerful. If you’re facing an IRS levy letter, there’s no time to waste.

You have a short amount of time to contact the IRS to lift it. Because, once it’s done, it’s done.

Sharif Muhammad

But you have options to get the IRS to release a levy. Here’s how.

Offer in Compromise Mistakes:

Tax relief expert (and former IRS revenue officer) Jeffrey McNeal says when he processed offers, he saw tons of mistakes made on the forms, even when prepared by CPAs and enrolled agents!  So be sure to ask an expert for help.

If You Think the IRS Made an Error

The IRS sends a Notice of Intent to Levy and Notice of Your Right to a Hearing as a final warning before taking action.

Once this final notice is received, [you have] 30 days to file an appeal of the proposed IRS collection action.

Canopy Tax

The appeal is a collection due process appeal.

It’s where you ask the IRS to lift the levy and to give back what they took from you. But it isn’t easy. A tax professional, such as a CPA or tax debt relief company, can help you with the process.

If You Can’t Afford to Pay

If you can prove an IRS levy notice is causing you economic hardship, they just might lift it. What does that mean?

The IRS has to believe you can’t meet necessary or reasonable living expenses with the levy letter in place. To do that, you must disclose a lot of financial information.

You’ll make financial declarations to the IRS as part of the process. .

Sharif Muhammad

And if you make a mistake, you could face serious consequences. Remember, Just because the IRS releases the levy, it doesn’t wipe away the tax debt. You still must work with them to get your balance paid off or settle your debt.

If You Can Make the Payments

Installment agreements are one way to settle your tax debt and stop an IRS levy letter. How it works depends on how much you owe.

A balance below $50,000 can be eligible for a payment plan.

Sharif Muhammad

He says you must make an “initial good-faith payment of a substantial amount” for the IRS to consider lifting the levy. You can still ask for a payment plan for balances above $50,000, but they’ll require additional paperwork.

Just because you enter an installment agreement doesn’t mean the IRS lifts the levy. Releasing the levy has to be part of the terms of the agreement.

That’s where someone who knows what they’re doing – a tax professional – can really help.

Sharif Muhammad

Quick tip: Once you start an installment plan, you will have a harder time qualifying for a debt reduction request later.  We recommend you speak to an expert to see if you qualify for tax relief first.

If you don’t know what to ask for or the ins and outs of the IRS process, you can get yourself into a situation where you don’t understand your options.

If You Can Sell Something to Pay It Off

Let’s say you owe the IRS $20,000. You don’t have that kind of cash lying around. But you own a house, and the house has equity. Except the IRS put a levy on your house, so that limits your options. With a levy in place, you can’t sell or refinance your home.

But here’s the thing, the IRS might work with you if it means they’ll get paid. If you agree to sell your house or refinance and take the equity out in cash, the IRS may lift the levy long enough for that to happen. You can use that money to pay off your debt. Once the balance is paid, the IRS will release the tax levy, and you can breathe easy.

If You Can File for Bankruptcy

Bankruptcy isn’t pretty, it can almost immediately ruin your credit. And it stays on your report for up to 10 years, so it isn’t a quick fix. Bankruptcy can haunt you for a long time. A bankruptcy proceeding might pause IRS collection efforts, which might pause a IRS tax levy. But it isn’t forever. There are a lot of rules about what tax debts can and can’t be discharged in bankruptcy. So, you might still be on the hook to pay it.