When the IRS has exhausted its civilized efforts to collect owed taxes, their next step is to issue an IRS levy. In plain English, an IRS levy is when your property is seized to pay your tax bill. This could include taking control of property and bank accounts, as well as garnishing wages.
The only surefire way to stop an IRS levy is to pay your tax bill in full, but if that’s not an option, there are other avenues to pursue. Though you will still have to pay all (or some) of the debt, the terms will be more favorable, and you’ll once again have control of your finances.
We’ll share five practical ways to stop an IRS levy and give you details on what to do next.
File an Appeal
There are a couple of valid reasons to file an appeal, and if your request is successful, it stops a levy in its tracks. The first is to prove that the IRS levy is causing financial hardship. If you’re unable to meet essential financial obligations for survival due to the levy, then the IRS might give you some breathing room.
Another potential reason to file an appeal is if you feel there’s been some type of mistake, and the debt collection is being done in error, you’ve already paid the bill, or the amount they say you owe is not accurate. You can file an appeal by submitting IRS form 9423.
Request to Pay in Installments
An IRS levy can be both a financial and mental burden, causing you undue stress, and even embarrassment, since levies are often on the public record. It’s especially uncomfortable if your wages are being garnished because this means your employer is well aware of the situation.
Though it may seem like it, the IRS is not an unreasonable organization. All they want is to be paid what they feel they are due. If you promise to pay back the debt in a reasonable amount of time (typically three to seven years), then there’s a good chance that you can stop the IRS levy and begin making reasonably priced regular payments.
Negotiate Your Tax Bill
Did you know that it’s possible to get your tax debt reduced? An Offer in Compromise (OIC) allows you to negotiate with the IRS to decrease the amount you owe. The reduction can be dramatic, especially if you work with tax experts with a successful track record.
In addition to saving money, an OIC also halts an IRS levy, giving you control of your finances once again. There’s a catch, though. Less than half of OICs are accepted by the IRS, and you must include detailed financial records. Working with a tax expert greatly increases your chances of a successful OIC, and the relative cost is well worth it.
See if You Qualify for the Fresh Start Program
In 2008, the IRS launched a new initiative called the Fresh Start Program. In light of that year’s financial crisis, the IRS sought to make it more affordable for people to pay off their tax debt in the face of skyrocketing unemployment, upside-down mortgages, and economic uncertainty at a global scale.
Contrary to the positive-sounding name, the Fresh Start Program won’t wipe your slate clean. However, it does allow you to distribute your payments over an extended period and avoid interest, penalties, liens, seizures, and wage garnishments.
You must meet specific requirements before you can qualify, including a tax debt under $50,000 (previously $25,000). If you do meet their threshold, you can end up saving hundreds, or even thousands, of dollars.
Speak to an Expert
As you can see, there’s more than one way to stop an IRS levy. The way that’s best for one person might not be the appropriate route for you. We recommend speaking to a tax expert about the various options available to determine your next steps.
In the IRS’s own words, the best way to stop a levy is to avoid having one enforced in the first place. Unfortunately, that advice is of no use if you’re already face to face with an IRS levy. To get help stopping an IRS levy, contact Levy & Associates for a free tax analysis.