The IRS uses many methods to collect back taxes from delinquent taxpayers. Among them is a levy, which is a legal seizure of property to satisfy a tax debt. Just about any type of property can be subject to levy including wages, money in the bank or other financial accounts, vehicles, real estate, and other personal property. There are ways to challenge a levy as well as grounds for obtaining a release of a levy. However, the rules are complex, and it is crucial to present a strong case especially if you are claiming economic hardship.
Proving Economic Hardship
The IRS is required to release a levy if the levy is creating an immediate economic hardship. This occurs when the levy prevents the taxpayer from meeting basic, reasonable living expenses. A taxpayer requesting release on these grounds must provide financial information to the IRS, including all sources of income and expenses, as evidence of the immediate hardship.
Effect of Levy Release
A levy release does not mean the taxpayer is exempt from paying the taxes owed. Taxpayers must take steps to resolve their tax debt. This may include entering into an installment agreement allowing the tax debt to be paid overtime. An offer in compromise may also be an option where the taxpayer can settle for less than the amount owed. However, there are strict requirements for an offer in compromise. Other relief may also be available depending on the taxpayer’s circumstances.
From early March through July 15, 2020, many IRS collection activities were suspended including levies. While collections have now resumed, taxpayers may still request the release of a levy due to a coronavirus-related hardship so long as they can meet the criteria discussed above.
If you are about to face an IRS levy or are already facing one, an experienced tax attorney can help you avoid a levy, reduce its impact, and resolve your tax matter. Contact us to discuss your options. For more information on IRS levies, see You Received an IRS Notice of Intent to Levy, Now What?