How to Stop a Bank Levy
The Internal Revenue Service, or IRS, may take action against you for not paying your taxes in full or in part within 30 days of the April 15 filing deadline. The most common method of punishment used by the IRS is a levy on some or all of your assets. Commonly, levying a bank account after the IRS issues a "Final Notice of Intent to Levy" letter. You have a few methods of stopping it provided you understand that the fight won't be easy and time is against you.
Instructions
Immediate Removal of a Levy
- 1
Work with a tax consultant first and foremost (and immediately) to develop a course of action. The IRS waits 21 days after a seizure warning before officially seizing money out of your bank account, so you have time to consider some options.
2Sell an asset or borrow money from a friend or relative to pay off your tax debt with accrued penalties. If you can manage this, the bank levy will be lifted immediately.
3Ask your employer to forward money in advance. You might even consider refinancing your home to pay tax debts. However, refinancing your home can sometimes take longer than 21 days. This option should be considered as a last resort. Instead, look for a quicker solution.
4Write a letter to the IRS explaining why a bank levy would be a financial hardship. Send copies of your bank statement and bills that show you wouldn't be able to meet basic standards of living should the account be seized. This sometimes works, but you still have additional steps to take.
Dealing with Installment Agreements
- 5
File your taxes first and apply for a three-year guaranteed installment agreement if you owe less than $10,000. Fill out the 9465 form at the IRS. (See Resource 1) Provide all your personal information, including your bank account and routing number. Indicate how much you can logically pay per month as proof you have financial capability to do an installment agreement.
6Try a streamlined installment agreement if you owe less than $25,000 and can't fulfill the payments of the guaranteed agreement. Fill out the 9465 form and include the same personal and financial information as above. The difference on this agreement is that you pay over a period of five years instead of three years, and can be quickly verified if you prove you can make steady monthly payments during a period of 60 months.
7Work with a certified public accountant on getting a verified payment agreement, if the guaranteed or streamlined plans get turned down. Fill out the IRS 433A form, or the Collection Information Statement. (See Resource 2) This form will require every morsel of your financial information so the IRS can determine what payment plan can logically work for you.
8Fill out another 433A Collection Information Statement form to try a partial payment agreement plan. Work closely with your accountant on this. If you can prove financial hardship in an installment agreement, the IRS may knock down your total debt and let you pay part of it in installments.
Offers in Compromise
- 9
Talk with your accountant about doing an Offer in Compromise as the very last step to take when all other options fail. The IRS will accept for an offer in compromise for three reasons: 1) acknowledgment that it will not receive the full total debt from you 2) proof that you are not responsible for a tax liability or 3) a stand-out financial hardship exists, such as an illness in your family.
10Fill out the IRS 656 form for Offers in Compromise (see Resource 3). Provide all your personal information and select one of three options available for time payments. A lump sum offer will require you to pay an offered total in five installments. A short-term offer will require time payments on an offer longer than two years. A deferred periodic payment offer will be paid during a more protracted time while the IRS investigates your case.
11Mail an initial application fee of $150 with your offer in compromise form to get the payments started. Attach the 656-PPV form, or Offer in Compromise Payment Voucher (see Resource 4) with all subsequent payments as required by the IRS. This form requires your name, address, Social Security number and amount you're paying for the month.
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