How do I stop an IRS levy?

The first question is: are you being levied now? Recognize that once the IRS issues a final notice, a thirty day period begins, and the IRS cannot levy until the thirty days expire. So you may have time to prevent the levy from starting if you take immediate action.

Okay, here are proven methods that may prevent or stop an IRS levy:

File a Collection Due Process Appeal (CDP). It gets your case out of the hands of a Revenue Officer and into the hands of an Appeals Officer who, with your lawyer, can explore collection alternatives. You have 30 days from the date of the final notice to file the CDP.

File an Equivalent Hearing. If you blow the CDP deadline, you can request an “equivalent hearing” that essentially performs the same function as a CDP except there is no right of appeal to U.S. Tax Court.

Enter into a Streamlined Installment Agreement. A repayment plan can prevent or stop an IRS levy. The “streamline” installment agreement requires no financial disclosure as long the tax liability is $50,000 or less and the debt can be paid in 72 months or less. Once the installment agreement is in place, the IRS will put the brakes on a levy.

TIP: Have your tax professional request the IRS tax transcript because it will reflect the amount the IRS will use to determine if you qualify for a streamlined agreement. For example, if the original tax owed was $35,000, yet because of penalties and interest it has ballooned to over $50, 0000, the citizen may still qualify.

Enter into an Installment Agreement. If you owe more than $50,000, the installment agreement process takes longer and it must be negotiated and approved by the IRS. Only after the IRS agrees, will the levy stop.

Get a Taxpayer Assistance Order. If a levy would create an undue hardship for the taxpayer, you can seek an order preventing collection while your case is investigated and alternative solutions are considered.

File Bankruptcy. The filing of bankruptcy instantly triggers a court ordered injunction called the “automatic stay.”  All creditor action, including IRS collection, must ceases. 

Offer in Compromise. If you have filed an Offer in Compromise, the IRS cannot levy or seize assets while the offer is pending, and during any appeal of the OIC. However, the IRS can file a Notice of Federal Tax Lien while the offer is under evaluation.