Top 5 Ways to Get an IRS Tax Levy Released

Top Five Ways to Release IRS LevyIf you have had the misfortune of experiencing an IRS levy then you have experienced the feeling of dread when looking at your bank account’s zero balance and no way to pay that month’s bills.  You may also know how hard it can be to get a levy released.   Below are top five basic strategies I use to overcome a levy on personal and business bank accounts or receivables.

#1. Ask the IRS Collector to Release

Though not always easy, it is sometimes possible to get a levy released simply by asking the collector to release it.   I’ll admit this is not common, but it is worth trying, if you ask nicely.   In some rare cases, the IRS is just trying to get your attention and all they need to release the levy is to know that you are willing to cooperate and move forward with a resolution.

If a Revenue Officer or phone agent is willing to release a levy, it’s usually because the total balance is low and you can resolve the debt with a streamlined Installment Agreement quickly.  Or, you have no prior history of debt and collection, and being that it is the first time you were levied, they can show leniency.  Or, it could be close to Christmas and the collector is feeling generous.  I repeat these cases are rare, nevertheless, it is always worth asking to begin the process of resolution and if nothing else, to let the collector know you are willing to cooperate and work out terms to resolve the tax debt.

#2. Claim Economic Hardship


If you have been levied and you can show the IRS that the funds being held prevent you from meeting your basic living expenses, in particular rent or mortgage, then you can use Economic Hardship as a means to request and obtain a levy release.   That does not mean that the entire levy will be released though.  For example, if the IRS levy is holding $10,000 in your bank account.  And your mortgage and other necessary expenses are only $4000, then you can expect to only get $4,000 of the levy released, and the rest will remain subject to levy.  See below for instruction on how to release the rest of the levy.

In the case of individuals whose only income is from social security, it is fairly easy to demonstrate that there is an economic hardship when a levy is placed on that individuals bank account or the social security payment itself.

Economic Hardship can only be used for “individuals” subject to the levy.  It cannot be used for a business even though that business is suffering economic hardship.  The term economic hardship only helps individuals that have an immediate need to pay rent, mortgage, food, medicine and the basic necessities.

#3. Comply With IRS Requests

A levy usually follows several letters from the IRS asking for payment and/or information.  In many cases people and businesses want a payment arrangement but they have not yet filed their returns, they are behind on the current quarter’s employment taxes or they simply have not given the IRS the financial statements and proof to show what they can afford to pay.  In some cases, a Revenue Officer or phone collector will release the levy once they have received what they are asking for depending on the particular situation.

Remember, the levy requires the bank to hold the funds for 21 days so that you can remedy the situation.  That may not be a lot of time for someone who has to file income tax returns, but if you act quickly once the levy has hit your accounts, you will maximize the amount of time you have to work towards getting the release.   You will always want to confirm very carefully with the collector what his conditions for levy release may be and then proceed with meeting those conditions.   Once you have satisfied the requirements the Revenue Officer will release the levy and the funds can go back to your account.

#4. File a Collection Appeal Request (aka CAP Appeal)

There are cases in which a business or individual has been levied in error or a legal requirement was not met before the levy was issued.  In these types of situations, you or your representative can file what is called a CAP Appeal.  The CAP (Collection Appeal Program) appeal will give you a hearing with an objective appeals officer who reviews the technical requirements of the levy to make sure it was issued legally.  It is rare that the IRS makes a mistake in issuing levies, but when they do and you cannot persuade the collector to release it based on his error, there is recourse to an appeals officer.  There are several steps to preparing a CAP that you want to be careful to follow to take advantage of the hearing process.  If you can make the case for a faulty levy, the appeals officer has the authority to instruct the collector to release the levy immediately.

#5. Hire a Professional Experienced in Resolving Back Taxes

This really is the easiest and most effective way to handle a levy situation if you are in it.  If you are unable to get a levy release with a simple request and then move on to resolution, it is time to consider a representative to help you.  In the long run you will be glad you did.

When the IRS has taken your money out of your account, it can be one of the most stressful experiences of your life.  I have helped many businesses and individuals that are pushed to the brink of disaster due to the consequences of levies to their bank accounts, receivables and merchant accounts.  When an individuals’ hard-earned money is suddenly swept up by an IRS levy it is crippling and has to be dealt with immediately.  A representative can approach the levy release with a focus on getting results while you focus on how to manage without the funds until a release can be achieved.  Simply put, there is no substitute for a tax resolution professional’s in-depth knowledge of the tax laws and experiences dealing with hundreds of similar situations over a career spanning many years.


 

About David K. Petzinger, Esq.