Tax Controversy & Resolution: Tax Levy Release 

Tax Levy Release

 

If the IRS issues a notice to levy and seize assets, the taxpayer generally has 30 days to challenge the tax levy and attempt tax resolution, or pay the amount due. If a taxpayer cannot pay the tax debt in full before the IRS is scheduled to seize its assets, the taxpayer may be able to remove the tax levy by executing an Installment Agreement with the IRS, or by entering other mutually agreeable solution(s). Different approaches to address an IRS tax levy are further outlined below.

Ways to Release a Tax Levy:

  • Pay Your Debt in Full

    • Levies help the IRS to collect tax money it is owed. If a taxpayer is able to pay its debt in full, including penalties and interest, within a reasonable period (up to 120 days), the IRS will release its levy immediately. 

  • Enter an Installment Agreement​

    • You may negotiate an Installment Agreement by filing Form 9465, Installment Agreement Request with the IRS which releases tax levies immediately.

  • Demonstrate Undue Hardship

    • The IRS may also release a levy if it would deprive you of the means to provide for your basic necessities ("undue hardship"). In order to determine whether undue hardship would apply based to a particular taxpayer, the taxpayer must generally provide financial documentation (bank statements, financial statements, etc.) to the IRS. This may also be demonstrated through filing an Offer-in-Compromise with the IRS.

    • If you lack the means to pay at all, you may be placed in Currently Not Collectible status. You may remain in Currently Not Collectible Status indefinitely, but you must undergo reevaluation of your financial circumstances every year. If you remain in Currently Not Collectible Status long enough (generally 10 years), the statute of limitations may run out and your tax obligation may be forgiven.

  • Negotiate a Release of the Levy

    • A taxpayer may be able to negotiate directly with a field agent to have your levy released. 
    • If a taxpayer can demonstrate through alternative means (e.g. sale of property levied) it will apply all or part of the proceeds from the sale toward the owed tax, a taxpayer may be able to negotiate a levy release with the IRS.

  • File a Collection Due Process or Collection Appeal Request

    • The Collection Due Process (CDP) and the Collection Appeal Process (CAP) allow the taxpayer to appeal a tax levy, which releases the levy while the appeal is being evaluated. CAP generally provides quicker decisions than the CDP. However, a taxpayer cannot contest the results of the CAP in tax court.

  • File Chapter 7 or Chapter 13 Bankruptcy

    • ​Filing Chapter 7 or Chapter 13 bankruptcy immediately normally stops (during bankruptcy) all collection action, including tax levies. Depending on the taxpayer's personal situation, a portion (or entire) tax obligation may be eliminated upon discharge. 

  • Demonstrate the Statute of Limitations Has Run Out

    • The IRS only is only allowed to pursue taxpayers for their tax obligations for a limited time period. If the statute of limitations had expired before the IRS filed its tax levy, this may prevent the IRS from attempting collection and/or tax levy. However, the the statute of limitations expiration date can be extended, tolled, or suspended dependent on certain facts or actions taken.

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