For the past few months, you’ve received various notices from the IRS regarding your unpaid tax balance, and all of a sudden, you walk into work in the morning, and the HR Department gives you a copy of Form 668-W that it just received in the mail. Or maybe your bank sent you a Form 668-A it received. You have just been hit with an IRS levy. Now you need the expertise of a seasoned tax professional to maneuver the release.
IRS levies come in two forms, one continuous, and the other is a “one-time” taking of your property held by third parties. A continuous levy is precisely as it sounds, a levy on regular income streams (ie. wages, salaries, royalties, etc.) that continues indefinitely until manually released or the underlying tax has been satisfied or has become unenforceable. Conversely, a one-time levy takes only the property currently held by a third party on your behalf when it is served (ie. banks, business receivables, etc.).
Common Ways To Get an IRS Levy Released
Currently Not Collectible Status
When the IRS becomes convinced that you have no collectible assets and no future source of collection, it can close the collection case by putting the account in “currently not collectible” (CNC) status and removing it from its collection case inventory. The case remains closed as long as your income stays below certain limits. The IRS will periodically follow up with cases in CNC status to determine if the taxpayer has the means to begin making payments toward their tax debt. While being placed in CNC status does not extend the Collection Statute Expiration Date (the 10-year period in which the IRS has to collect taxes after they are assessed), the underlying tax liability continues to accrue interest.
Installment Agreements
The IRS is required to release a levy if you enter into an installment agreement. However, for tax liabilities exceeding $50,000, the IRS will first request that the taxpayer pay as much as possible and borrow the remainder (unless doing so will create an economic hardship) before the IRS enters into an installment agreement with the taxpayer. The IRS will consider an installment agreement only if these attempts fail and the taxpayer is compliant with its filing requirements (all returns have been filed). Essentially, the IRS wants to squeeze as much money out of you as possible before allowing you to pay the remaining balance over time.
Offer-in-Compromise
In very narrow circumstances, the IRS may agree to compromise unpaid civil tax accounts for less than the full amount of the assessed balance due. This is referred to as an “Offer-in-Compromise” (OIC). The IRS may accept an OIC when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects the taxpayer’s collection potential. If an OIC is accepted, a contract exists whereby the taxpayer must comply with all the terms of the OIC in exchange for the IRS’s agreement to reduce the tax liability owed. However, if the OIC is rejected, the taxpayer returns to the position he/she was in before submitting the OIC, the taxpayer loses the funds required to be submitted with the OIC or while it was pending, and the Collection Statute Expiration Date is tolled for the entire period the OIC was pending (oftentimes 1-2 years), leaving the taxpayer no closer to putting their tax debt behind them.
Bankruptcy
The filing of a bankruptcy petition, whether in Chapter 7, 11 or 13, results in an immediate automatic stay that enjoins virtually all tax collection efforts against the taxpayer and his or her property. If the IRS levies the taxpayer right after the bankruptcy is filed in violation of the automatic stay (there is typically a time lag between when the bankruptcy is filed, and when the IRS is notified), the IRS must turn over the levied funds to the taxpayer as soon as possible. Generally, the automatic stay to collect taxes continues until either the bankruptcy court lifts the stay, the bankruptcy case is closed or dismissed, or the debtor receives a discharge.
CAP
Under the Collection Appeals Program (CAP), a taxpayer facing a levy can briefly forestall the collection action to challenge procedural errors. However, taxpayers cannot use CAP to challenge the underlying tax assessment. The taxpayer may appeal before or after the IRS places a levy on the taxpayer’s wages, bank account, or other property. However, once the levied proceeds are applied toward the taxpayer’s liability, the taxpayer must submit an administrative claim with the IRS to return the property. The appeal typically occurs in less than one month, but the Appeals Office tries to decide on the case within five days. The decision is binding on both the taxpayer and the IRS.
Tax Workout Group can remove a Tax Levy on your Paycheck
At Tax Workout Group, we understand the complexities of getting a levy release. Our team is here to help you resolve your tax debt and free your property from the shackles of the IRS. We offer various services and employ appropriate tools to protect you from enforced collections and ease the stress that it causes.
Don’t let unpaid taxes and IRS collections disrupt your life. Contact Tax Workout Group today for a free consultation or more information on resolving your tax issues and avoiding an IRS tax levy.
