Consider hiring a professional tax consultant if you face an IRS levy, so you can review your options and get your financial records in order. (Photo by Steve Mitchell)
This article is designed to give you an overview of techniques that can be used to stop IRS levies. Each option has different pros and cons; therefore, extreme caution and due diligence should be used before implementing any of these techniques.
IRS liens vs. levies
Before going into detail about stopping a levy, it's important to note that the IRS issues both liens and levies. There is a difference between a lien and a levy. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.
In other words, a lien is a formal declaration that you owe money to a debtor and that they are choosing a specific piece of property of yours to collect the debt. If the property is sold, they would get paid first and the balance goes to the next lien holder; anything after that, is yours.
A levy occurs when the IRS seizes the property that they have placed a lien against. If you receive a “Final Notice of Intent to Levy,” you need to act quickly before the property is taken.
The IRS can levy many types of property — if it is of value, it may be a candidate. Property seizure can include (but not be limited to) your wages, your bank account, your tax refund, your car, even accounts receivables if you own a business (that’s really scary for business owners).
When does the IRS levy?
A levy is issued after the following actions:
1. IRS sends you a “Notice and Demand for Payment”
2. You neglect or refuse to pay the tax.
3. You receive a "Final Notice of Intent to Levy" and "Notice of Your Right to a Hearing" (aka levy notice)
Levies can be stopped or modified, but it's not an automatic solution. There are some immediate stop-gap ways to have a levy "released." However, timing is critical. Additionally, extreme caution must be used because many measures may only be temporary and will merely extend the time the IRS has to collect on your tax debt.
Some ways to stop an IRS Levy:
1. Request a Collection Due Process Hearing
This must be done within 30 days from your "Notice of Intent to Levy" letter. You must exercise extreme
caution when making this request, however. You will now be on (what may appear to be) an accelerated time frame. You also must be prepared to present a compelling case in a short amount of time.
2. Enter into an Installment Agreement
To get the levy released, you’ll still need to be in compliance. You’ll also like have to have your financials in some sort of order. The IRS may request a good deal of financial information from you. If it’s not ready, your levy won't be removed until it is.
3. Ask for an Offer in Compromise
For the past several years, the amount of OIC’s being rejected are on the decline. Still, more than 50 percent of all OIC’s are rejected, and they must be filed with non-refundable fees. This can be a very expensive stop-gap measure.
4. Request a Collection Appeals Program
This is a nice (and cost free) stop-gap, but you still must be prepared to offer the IRS an immediate solution. There are a couple cons to this action as well, most notably, no judicial review is possible if you choose this route.
Take action before tax penalties increase
Bear in mind that each option has different consequences. If you’re going to go it alone, assess each possibility carefully. Remember, review not only your tax liability issues, but also your financial circumstances.
If you’re going to seek professional help from an accountant. be sure to provide as much information as possible so that the best decision can be made on your behalf.
No matter what you decide, you must act! The very worst thing that you can do is nothing. IRS penalties and interest increase your tax debt every day. Those fines compound at alarming rates and can quickly double, triple, even quadruple your tax debt.
So carefully review your options, prepare your financial documents thoroughly before contacting the IRS, and then take action.
About this Expert Contributor: Marc Adams, owner of MCA Certified Tax Preparers LLC. is an IRS Licensed Enrolled Agent who specializes in tax preparation in Bergenfield, New Jersey . Enrolled Agents are the only professionals who are tested, licensed and regulated by the Division of the Treasury; they are tax experts.
As of Dec. 30, 2014, this service provider was highly rated on Angie's List. Ratings are subject to change based on consumer feedback, so check Angie's List for the most up-to-date reviews. The views expressed by this author do not necessarily reflect those of Angie's List.