An IRS levy is one of the IRS’s strongest collection tools, allowing them to legally seize your property, wages, or bank accounts to recover unpaid taxes. It is essential to act quickly when faced with a levy to protect your assets and financial stability. Here are 10 practical, actionable steps to stop an IRS levy and regain control of your finances.
What Is an IRS Levy?
An IRS levy is the legal seizure of your assets or property to pay off your outstanding tax debt. This differs from a tax lien, which only places a claim on your property but doesn’t remove it. Levies can include garnishing wages, freezing and withdrawing funds from bank accounts, or taking personal property like cars or real estate.
1. Understand the IRS Levy Process
The IRS must notify you before placing a levy. Typically, you’ll receive:
- A “Notice of Intent to Levy” (such as IRS Letter LT11)
- A “Final Notice before Levy” (like IRS Notice CP504)
These notices provide a window for you to respond, dispute the levy, or make arrangements before seizure begins. Ignoring these notices leads to automatic levy actions.
(See more on IRS Notice CP504: Final Notice Before Levy and IRS Letter LT11 (Notice of Intent to Levy).)
2. Act Immediately Upon Receiving a Levy Notice
Once you receive a levy notice, time is critical. Typically, you have 30 days to respond. Contact the IRS without delay to discuss your situation and avoid the levy being executed.
3. Pay Your Tax Debt in Full If Possible
The most straightforward way to stop a levy is to pay your full tax balance immediately. Once debt is paid in full, the IRS is required to release the levy. You may use savings, liquidate assets, or borrow if feasible.
4. Set Up an Installment Agreement
If full payment isn’t possible, negotiate a payment plan with the IRS. Setting up an installment agreement shows you’re cooperating, which typically halts levy actions while you make monthly payments.
5. Request Currently Not Collectible Status
If you’re undergoing significant financial hardship—such as unemployment or medical emergencies—you can request “Currently Not Collectible” (CNC) status. This suspends collection activities, including levies, temporarily until your financial situation improves.
6. Submit an Offer in Compromise
An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount owed if you can demonstrate that paying the full amount would cause undue financial hardship. Approval of an OIC stops levies permanently.
(For detailed guidance, visit IRS Offer in Compromise.)
7. Appeal the Levy or Request a Collection Due Process (CDP) Hearing
If you disagree with the levy or believe it was issued in error, you can request a Collection Due Process hearing. This appeal suspends levy collection during the review and can lead to levy release if successful.
Learn more on How to Request a Collection Appeal to Stop an IRS Levy.
8. Use the IRS Taxpayer Advocate Service
If your levy situation is urgent or complex, or if you face delays with IRS responses, the independent Taxpayer Advocate Service (TAS) can provide help and intervene on your behalf.
More about their role here: Taxpayer Advocate Service.
9. Check for IRS Procedural Errors
The IRS must follow all legal procedures when issuing a levy. Mistakes—such as failing to send proper notices—can be grounds to have a levy invalidated and released. Review notices carefully or consult a professional.
10. Hire a Tax Professional
Tax attorneys, enrolled agents, and certified public accountants experienced in IRS collections can negotiate with the IRS effectively. They understand levy laws, the appeal process, and can often stop levies faster than individuals.
Real-World Example: How a Bank Account Levy Was Stopped
Imagine your checking account is unexpectedly frozen due to a $5,000 IRS levy. Upon receiving the levy notice, you promptly contact the IRS, set up an installment agreement, and request a release of the levy. Within days, your funds are unfrozen, and you regain access.
Who Is at Risk of an IRS Levy?
Anyone with unpaid tax debts who fails to respond to IRS notices is at risk. Independent contractors, self-employed individuals, and business owners often face levies without automatic withholding protections like regular employees.
Tips to Avoid Future Levies
- File tax returns on time, even if you can’t pay immediately.
- Communicate proactively with the IRS at the first sign of trouble.
- Keep detailed records of all tax payments and notices.
- If self-employed, pay estimated taxes quarterly to avoid large balances.
Common Misconceptions
- Ignoring IRS notices will make levies go away: Actually, it leads to more aggressive collection actions.
- IRS can seize Social Security benefits: Generally, Social Security income is protected from IRS levies.
- You must pay in full before stopping a levy: Payment plans or hardship status can halt a levy without full payment.
Frequently Asked Questions
Q: How quickly can an IRS levy be stopped?
A: Acting swiftly, levies may be released within days if you pay in full, set up payment plans, or prove hardship.
Q: Can the IRS garnish wages?
A: Yes, wage garnishment is a common type of IRS levy.
Q: What happens if the IRS levies my property?
A: The IRS can seize and sell your assets to pay off your tax debt.
Authoritative Resources
Stopping an IRS levy requires fast, informed action. By following these 10 steps, you can protect your assets, work toward resolving tax debts, and avoid severe financial consequences.
