IRS Tax Levy Help: Get a Bank or Wage Levy Released

Having money removed from your bank account or your paycheck by IRS is not entirely new. This is called a bank levy when it is removed from your bank account, and a ‘wage garnishment’ (or wage levy) if from your paycheck. When this happens, there are ways to go about it. The IRS will release the levy, but it usually needs a payment agreement, a settlement, proof of financial hardship, or full payment of your outstanding back taxes first.

Tax levies are somewhat controversial, but they are a way in which the IRS can reclaim delinquent debts that might be owed to them. Tax liability can be a slippery slope for many people, and many ramifications can occur due to this. You need to make sure you understand the stages in the process that will affect you and how they can be stopped.

Understanding how tax levies apply to you and what you need to do to make the most of this is important. Of course, keeping up with tax and other repayments is crucial, but sometimes things make it more challenging to keep up with payments. If you default on tax payments, you could find yourself the subject of an IRS tax levy, and you need to know what this is, how it affects you, and how it can be released.

An IRS tax levy is the legal seizure of a taxpayer’s property to satisfy an outstanding debt that has not yet been paid. When a levy is issued, the IRS can take and sell assets to help pay for the debt. This includes things like bank accounts, vehicles, real estate, and other personal property and things like retirement income, wages, Social Security and more. This is generally a step only taken when the IRS feels it has no other choice, and there are usually many conditions that need to be met before the IRS is allowed to collect a levy.

A levy isn’t the same as a lien. A federal tax lien is a legal claim against your property that protects the government’s interest. A levy actually takes the property.

Each kind of levy works a little differently, which changes how fast we need to move.

One of the critical things that you need to understand as a taxpayer is when a levy can be issued and on what grounds. It’s important to note that this is never the first step in the process, and if a levy has been issued, you will have had multiple warnings about the unpaid debt. There are four requirements that the IRS must usually meet before it can levy, and these are

• They sent the taxpayer a tax bill (also known as a Notice and Demand for Payment)
• The taxpayer did not pay the tax (either could not or would not)
• The IRS sent the taxpayer notice that they would be issuing a levy at least 30 days after the letter. This is typically known as a Final Notice of Intent to Levy and Notice of Your Right to A Hearing.
• The IRS gave the taxpayer advance notice that it may contact third parties, such as an employer or bank

1. Tax billA notice and demand for payment, such as a CP14.
2. RemindersFollow-up notices as interest and penalties grow.
3. Intent to levyA notice such as CP504. The IRS can take a state tax refund after this one.
4. Final noticeLT11 or Letter 1058. You have 30 days to request a hearing.
5. LevyThe IRS contacts your bank, employer or other payers.

There are exceptions to the 30-day hearing notice. The IRS can levy first and offer a hearing afterward when collection is in jeopardy, when it takes a state tax refund, and in some cases involving federal contractors or repeat employment tax balances.

The final notice gives you appeal rights that matter more than most people realize. We use them to buy time while we set up the resolution.

If a levy took money that belonged to someone else, such as a co-owner of a bank account, that person can file a wrongful levy claim, generally within two years.

Paying the outstanding back taxes is not always possible, thus forcing you to settle for the payment plan agreement option. However, people looking to go for the IRS payment plan agreement option are always worried about how long it takes to complete the paperwork and have the IRS release the removed levy/garnishment or stop removing fresh funds.

By law, the IRS must release a levy when:

• You paid the amount you owe
• The collection period ended before the levy was issued
• Releasing it will help you pay your taxes
• You enter a payment plan whose terms don’t allow the levy to continue
• The levy causes economic hardship, meaning you can’t meet basic, reasonable living expenses
• Your property is worth more than you owe, and releasing part of it won’t hurt collection

A short-term payment plan, often called an extension to pay, is one of the fastest routes. It gives you up to 180 days to pay in full if you owe less than $100,000 in tax, penalties and interest.

If your extension to pay is granted, we ask for the immediate release of your levy/garnishment. We also request that your employer/bank/payer be furnished with the levy release when speaking to the IRS representative.

This means a quick release of your levy/garnishment can often be arranged with the IRS, once you have met the terms of the extension-to-pay agreement.

Another way to push for a fast levy release is a simple monthly payment plan (also called a streamlined installment agreement) for individuals who owe $50,000 or less. We can often finalize the agreement on the phone with the IRS representative and ask for the levy release to go to your employer, payer or bank right away.

In the case of a bank levy, the funds will undergo a 21-day freezing period in the bank before they are remitted to the IRS. Hence, you should try to remediate the problem as soon as possible by getting in touch with one of our tax experts. From here, we can set up an agreement as soon as possible. The bank levy will be released, and subsequently, your funds, once you complete the simplified installment agreement or secure an extension to pay, as long as the release comes before the bank sends the money.

There are instances where the simplified installment agreement and the extension to pay will not work. Hence, the next move will be to request a more complex installment from the IRS. For this, the IRS will demand a lot of documentation on your financial situation to determine your qualification status, usually on a collection information statement such as Form 433-F or 433-A. This, obviously, takes longer.

The same documentation conditions apply if you prefer one of IRS’ special programs designed for individuals with financial challenges. These programs include Offer In Compromise or Settlement, and Currently Not Collectible Status or Deferred Payment.

For currently not collectible status, the request rests on financial hardship as the main reason for the release of the levy. However, the levy can stay in place until the IRS completes the processing of the paperwork involved in the agreement. Most times, the IRS omits the request for release of the levy part in the agreement. Hence, we make sure to request the release of the levy once the agreement has been set up successfully. When we can, we set up the agreement by phone, and we send any follow-up documents right away.

1. We read the notice and your account

   We file a power of attorney, pull your IRS transcripts, and confirm what you owe, which notice you received, and how many days are left.

2. We protect your appeal rights

   If the 30-day window is still open, we file the hearing request on time, which pauses levy action while we work.

3. We set up the resolution

   We file any missing returns and set up the option that fits: a short-term plan, a payment plan, an offer, or hardship status.

4. We get the levy released

   We ask the IRS to send the release to your bank or employer, follow up until it’s lifted, and look for penalties that can come off.

If you are not ready to face the hassles involved in the rather complex process, a better option will be to work with our tax team. Our in-house tax experts can help you to identify the best payment plan with the IRS for your case and file a request for levy release on your behalf at the IRS. Feel free to arrange a meeting or a free consultation with us here or by putting a call through to (888) 548-0478. You can also see all of our tax debt relief options and how the IRS Fresh Start program works.