IRS Bank Levy Release: Guide to Stop Bank Account Garnishment
If you want to avoid your bank account funds from being seized it is important that you act quickly when dealing with an IRS bank account levy. If the IRS does seize funds from your account it is highly unlikely to ever get that money back. From the day you receive the "Final Notice of Intent to Levy and Notice of Right to a Hearing" you will have a minimum of 51 days before the IRS will seize funds from your bank account but a minimum of 30 days prior to the IRS freezing your bank account. The easiest way to prevent the bank garnishment from going into effect is to act within the first 30 days of receiving the final notice of intent to levy.
The IRS sends the final notice with hopes that you will pay your taxes in full or come to some other resolution so they don't have to levy your assets. The IRS prefers to not to levy assets as it costs them money and time but they use this method as a last resort to collect taxes. In order to prevent the IRS from seizing your assets you must decide on the best method to use based on your tax and financial situation. When choosing a method it is highly suggested that you talk with an IRS bank levy professional in order to find the best resolution method since time is limited and a tax professional knows the inner workings of the IRS and can ensure your levy is stopped quickly with minimal financial effects. Below are some common methods for IRS bank levy release.
Ways to Release an IRS Bank Levy: Stopping Bank Account Garnishment
There are many ways of IRS bank levy release and the method you choose should be based upon your financial situation. The methods below go in the order from better to worst financial situation. It is important that you don't try to trick the IRS by saying you are in actually a worst financial situation than you actually are because chances are they will find out and you will be in more trouble than when you originally started.
- Pay the IRS in Full
Once the IRS is paid everything that they are owed they will stop the levy immediately. Most of the time taxpayers get in the situation of having the IRS garnish their bank account because they do not have the funds to pay the IRS or paying IRS would not allow them to pay other bills that are required for general life expenses. So even if you cannot pay in full you can think outside of the box for ways to come up with funds to pay the IRS in full. Below is a small list of ways to pay in full even if you don't have the funds.
- Borrow From Friends or Family - This is really only a good option if you know you will be able to pay them back very soon. When dealing with a bank levy it is important to act fast and sometimes borrowing from other people will allow you buy time to do something that takes more time. For example, say you know you can refinance your home but the refinance process is long and it won't be done before the IRS seizes your funds. If you can borrow funds you will be able to pay back the lenders once the refinance loan goes through and is approved.
- Sell something - Do you have a lot of stuff lying around that is of value? You may be able to sell quickly on eBay or through a garage sale to quickly gain funds that may be enough to pay off the IRS for IRS bank levy release. Maybe you have an old car that you collected that is worth some money, now can be a time to rethink how important that car really is to you.
- Refinance your home - If your home has gained some equity there is a possibility you may be able to refinance your home and take that equity out as a loan. The process may take too long though since your time is limited if you are dealing with a bank levy.
An installment agreement is one of the most common forms of paying taxes for taxpayers that cannot afford to pay their taxes in full. With an installment agreement you will be allowed to pay off the taxes owed in monthly increments over a period of time up to 3 years. If you are being threatened by an IRS bank levy the IRS will likely to accept an installment agreement as long as you don't have a history of defaulting on these types of agreements. Once your filing has been accepted by the IRS, the IRS bank levy will be released and you will be considered to be in good standing with the IRS as long as you keep up on your monthly payments.
If you can prove to the IRS that by them levying your bank account it would cause financial hardship. Each year the IRS declares many taxpayers "Currently Not Collectible". What this means is that the IRS won't actively seek to collect taxes from that taxpayer for the given time. If you can get declared uncollectible the IRS will pause collection actions and check back with you at a future date to see if your financial situation has improved enough to collect the owed tax amount. This is only a temporary solution but can buy you more time to resolve your financial situation and possibly settle your taxes in another manner.
The offer in compromise program offered by the IRS allows taxpayers to settle taxes owed for far less than the total amount. Many taxpayers try to qualify for this form of settlement but only a fraction actually receives it. The offer in compromise was created for those taxpayers that truly cannot pay their taxes or it would be unfair to hold them liable for what is owed. The IRS will only accept an OIC if the amount offered by the taxpayer is equal to or greater than what the IRS would expect to collect from you, even if they used forced collection mechanisms.
Above are the 4 main mechanisms that used to stop a bank levy depending on financial situation. Below are a few more methods that can be used that are not dependent upon financial situation:
- Appeal the Bank Levy
If you do not agree with the levy you have a right to appeal the levy. You can request a collection due process hearing by filing IRS form 12153. You may be able to call the number located on the "Final Notice of Intent to Levy" and resolve the issue over the phone. However, but it is a good idea to file for an appeal as well just to be safe since your time is very limited when dealing with a levy and a phone call does not ensure the IRS bank levy will be stopped.
- Statute of Limitations Expiration
If you are an individual that wants to live by hiding from the IRS it is possible that the statute of limitations can expire before the IRS actually collects what is owed. The IRS typically has 10 years to collect on tax debts and once the 10 years has passed the IRS can no longer legally collect on those debt amounts. If the IRS has already issued a bank levy there will be no way of stopping it with this method because they already have taken legal claim to those funds. If the IRS issues a bank levy and the statute of limitations has already expired then the levy can be appealed and will be removed once it is shown that the tax debts have passed that statute of limitations.
- Innocent Spouse Relief
This form of resolution only applies to individuals that have filed a joint tax return and the tax return has an understatement of tax due to erroneous items of the other spouse or former spouse. It is possible to claim innocent spouse relief and put the full tax liability on your spouse or former spouse and not be held liable for the taxes anymore. Once you are no longer liable for the taxes the IRS bank levy will be stopped.
No matter what your financial situation is, it is always a good idea to hire a tax professional when dealing with an IRS bank levy release. A tax professional can quickly analyze your financial situation and come up with a plan of action that can effectively stop the tax levy and protect your assets from the IRS. Even if your financial situation is extremely poor it is imperative that you take action because the IRS will not stop until it is shown proof of your financial situation. Most of the time a bank levy can be quickly stopped with a tax filing that matches your financial situation. Take advantage of our free consultation and talk with a tax professional about resolving your bank levy.