IRS Tax Levies – How to Fix a Tax Levy
In my last post, I talked about what property the IRS tax levy can reach. You can find that and prior posts on tax levies here and here. In this post, I will discuss how to fix a levy if you are so unfortunate as to be subject to one.
Just as a reminder, if you don’t want to peruse my other posts, an IRS levy is meant to hurt. The IRS only uses a levy to seize your assets if you disregard the IRS’ attempts to resolve your tax debt. Commonly, a tax levy takes the form of wage garnishments, bank levies, and seizure of state tax refunds. That is not all – The IRS can seek to foreclose on your home and attempt to seize money due you from customers, clients and patients. So with that, let’s talk about how to obtain a release of an IRS tax levy.
How to Obtain a Levy Release
Most levies take the form of bank levies so I will describe the process of getting a bank levy released but the process is the same regardless of type.
1. Call the IRS and Request a Release.
First, make sure that you have been levied by the IRS. You may have been levied by the state tax authorities or by a creditor (if there is an outstanding judgment). Call your bank to find out for sure. While you are at it, make sure to get your bank’s fax number where the IRS can fax a release.
Once that is done, find the IRS phone number on your IRS levy notice or call 800-829-1040. Be prepared to discuss your financial situation with the IRS and explain why you need the levy released (rent, gas, food, to make payroll, etc.). Mere inconvenience is not enough, you need to show that the levy will cause an economic hardship.
NOTE: all your answers should be truthful and complete. You could open yourself to civil and criminal penalties for providing false or misleading information to the IRS.
If the IRS agent refuses to release the levy, ask why. Find out the reason for the refusal and see if there is something that you can do to satisfy the agent to obtain the levy release. If that does not work, request to speak with the agent’s manager. Get a name, phone number and when to expect a call.
When speaking with the manager, be prepared to address why the levy should be released as well as address any of the original agent’s concerns. If the agent’s manager refuses, follow the same procedure you followed with the original agent and then request a call from the IRS territory manager. Sometimes working up the ladder of authority will get results.
2. Find Out What the IRS Needs to Obtain a Levy Release
Often as part of obtaining a levy release, you may be requested to provide information the IRS, such as paystubs or bank statements. The IRS generally requests that you have prepared any missing tax returns (or provide copies of filed returns if the return has not been processed yet). Additionally, you will be required to provide a collection information statement. We call these 433 Forms based on their IRS form number. Generally, the IRS will ask you to provide a 433F form along with some additional information. This will be your chance to show the IRS what you can reasonably afford to pay (or that you are unable to pay at this time).
3. Request a 30-Day Deadline to Provide the IRS with Any Requested Information or Missing Returns.
After the IRS tells you what to provide, request at least 30 days to respond. You want enough time to put the requested information together and still have time to make sure it all makes sense. If you need more time, then ask for it! Make sure to write down what is requested along with the agent’s name and badge number so you can refer to it when you call the IRS again.
4. Provide the Requested Information.
After the call is done, do not delay gathering the requested information. If you do not keep your end of the bargain, you will not get much leeway in the future from the IRS. IRS agents are trained to keep notes on phone calls. They will confront you with what you said previously if you have unfulfilled promises. You do not want that kind of trouble. If you find that you need more time to respond, call the IRS immediately and let them know you need more time. You should get at least one extension.
Just keep in mind that once you have a payment plan in place you will not be subject to future tax levies so long as you keep up with the terms of the agreement (such as payments).
5. If All Else Fails, Contact the Taxpayer Advocate.
In some cases, you may find yourself unable to work something out with the IRS or you just cannot get the IRS to respond to you regarding the bank levy. You may need to contact your local Taxpayer Advocate to assist you.
The Taxpayer Advocate is equivalent to an ombudsman. Essentially, an ombudsman is someone who is tasked with investigating complaints against an organization. In this case, investigating complaints about the IRS’ failure to assist a taxpayer resolve their IRS problem. To get help from the Taxpayer Advocate go to https://www.irs.gov/advocate/local-taxpayer-advocate to find your local Advocate.
If you have been levied, you need to act immediately. Follow the above instructions to obtain a release and get into some payment arrangement. Just make sure to be honest and keep your promises. Often the IRS is willing to work with you but unkept promises will hurt you down the road if you need relief in the future. Of course, the best way to avoid having your property seized is to avoid a levy altogether. In our next post, we will discuss what you can do to avoid a future levy. For now, if you have been levied, do not ignore this situation as it will only get worse.
I am Maine’s IRS Problem Solver. My firm helps Maine taxpayers in trouble. If you or someone you know in Southern Maine wants more information on how to resolve your unpaid taxes, please feel free to contact me directly at 207-502-7181 or by filing out my contact form. A Maine tax attorney can help you consider your options.