Taxpayers frequently ask their tax attorney what to do if they have received a notice that the IRS may levy their property. You should immediately take steps to resolve your tax liability and request a levy release. The IRS can also release a levy if it determines that the levy is causing an immediate economic hardship. If the IRS denies your request to release the levy, you may appeal this decision. You may appeal before or after the IRS places a levy on your wages, bank account, or other property. After the levy proceeds have been sent to the IRS, you may file a claim to have them returned to you. You may also appeal the denial by the IRS of your request to have levied property returned to you. For a full explanation of your appeal rights, see Publication 1660, Collection Appeal Rights.
The IRS is required to release a levy if it determines that:
- You paid the amount you owe,
- The period for collection ended prior to the levy being issued,
- Releasing the levy will help you pay your taxes,
- You enter into an Installment Agreement and the terms of the agreement don’t allow for the levy to continue,
- The levy creates an economic hardship, meaning the IRS has determined the levy prevents you from meeting basic, reasonable living expenses, or
- The value of the property is more than the amount owed and releasing the levy will not hinder our ability to collect the amount owed.
Please note: The release of a levy does not mean you don’t have to pay the balance due. You must still make arrangements with the IRS to resolve your tax debt or a levy may be reissued.
What is an IRS Levy?
If you don’t pay your taxes (or make arrangements to settle your debt), the Internal Revenue Service could seize and sell your property. However, the IRS will not seize your property to collect an individual shared responsibility payment. Moreover, the IRS usually seize only after the following things have occurred.
- The tax must be assessed and you must receive a notice of the outstanding balance
- You have failed to pay the tax, and
- The IRS has sent you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before the seizure.
Is the IRS Levy Causing Immediate Economic Hardship?
If the levy on your wages is creating an immediate economic hardship, the levy must be released. Additionally, if the levy on your bank account or other account is creating an immediate economic hardship, the levy may be released.
An economic hardship occurs when the taxpayer shows that the levy prevents that taxpayer from meeting basic, reasonable living expenses. In order for the IRS to determine if a levy is causing hardship, the IRS will usually need you to provide financial information so be prepared to provide it and review all expenses with your tax attorney.