Glossary

Levy Release

What Does It Mean to Have an IRS Levy Release?

A levy release is when the IRS removes a legal claim on your property (like your bank account, wages, or car) that they had put in place to collect unpaid taxes. This usually happens when you resolve your tax debt, make an agreement to pay, or the IRS determines the levy was a mistake.

Understanding IRS Levy Releases: A Detailed Guide

Have you ever received a scary notice from the IRS saying they are going to seize your property? That’s a levy. Thankfully, there’s a way out. It’s called a levy release. It means the IRS is letting go of the hold they had on your belongings. It’s important to know what a levy release is and how to get one. Let’s break it down.

What’s the Big Deal with an IRS Levy?

Before we dive into the levy release, let’s talk about what a levy actually is. Think of it like this: You owe money to a friend and you don’t pay them back. Eventually, they might ask a court to take some of your stuff to get the money they’re owed. That’s basically what the IRS does with a levy, but on a much bigger scale.

A levy is a legal seizure of your property to satisfy a tax debt. It’s one of the IRS’s tools to collect back taxes. They can levy various things:

Your bank account: They can take money directly from your bank account.
Your wages: They can garnish your paycheck, taking a portion of your earnings.
Your personal property: They can seize things like cars, boats, or even your house.

An IRS levy is a serious action. It can have a huge impact on your life and finances. It’s why avoiding it is always the better option.

What is a Levy Release?

A levy release is the IRS’s formal removal of a levy. When the IRS issues a levy release, they are no longer seizing your property or assets. Think of it as a “get out of jail free” card for your bank account, wages, or whatever the IRS had a hold of.

Imagine a clamp being removed from your finances. That’s what a levy release is like. It signifies the IRS has determined that the levy is no longer necessary or valid. This usually means you’ve taken steps to resolve your tax problem.

Why Does the IRS Issue a Levy Release?

There are a few common reasons why the IRS might issue a levy release:

You Paid Your Tax Debt in Full: This is the most straightforward reason. If you pay off the entire amount you owe, the IRS has no reason to continue the levy.
You Set Up a Payment Plan: If you can’t pay everything at once, you can set up an installment agreement with the IRS. Once the agreement is in place, they usually release the levy.
Offer in Compromise: If you can’t afford to pay what you owe, you might be able to settle your debt for a lower amount through an Offer in Compromise (OIC). If the OIC is accepted, the levy is released.
The Levy was Wrong: Sometimes the IRS makes mistakes. If the levy was issued in error, they will release it immediately.
Financial Hardship: In rare cases, the IRS will release a levy if it causes a severe financial hardship. You’ll need to prove that the levy is preventing you from meeting your basic living expenses.
Statute of Limitations Expired: The IRS has a limited time to collect taxes, generally 10 years. If the collection statute of limitations expires, they must release the levy.

How Do You Get a Levy Release?

Getting a levy release isn’t always automatic. Here’s a step-by-step approach:

Address the Underlying Tax Issue: The first step is always to address why the levy was placed. This could mean filing past tax returns, paying the taxes you owe, or setting up a payment plan.
Contact the IRS: Once you’ve taken action to resolve your tax issues, contact the IRS to discuss the levy. You can call the phone number on the levy notice. Be prepared to provide details about your steps to correct your tax issue.
Provide Supporting Documentation: You’ll likely need to provide proof that you’ve paid your tax debt, set up a payment plan, or that the levy was incorrect. Keep clear records of all your interactions with the IRS.
Follow Up: Be persistent. The IRS can sometimes be slow to respond. Don’t be afraid to call them again to check on the status of your levy release.
Consider Professional Help: If you’re struggling to navigate this complex process, consider consulting with a tax professional. They can provide guidance, help you complete the necessary forms, and advocate on your behalf with the IRS.

What Happens After a Levy Release?

Once the IRS issues a levy release, they must notify the financial institution or employer that had the levy. This usually means that the bank or employer should stop sending funds to the IRS.

Here’s what you should generally expect:

Your Bank Account is Unfrozen: If the levy was on your bank account, you should regain access to your funds.
Wage Garnishment Stops: If your wages were being garnished, your employer should stop taking money from your paycheck.
Return of Seized Property: If the IRS seized physical property, it should be returned to you, although it may take some time.
Your Credit Can Still Be Impacted: A levy is a serious mark on your financial record. Even with a release, it can still impact your credit score.

Common Mistakes and Misconceptions

Here are some common mistakes and misconceptions about levy releases:

“The IRS will automatically release the levy when I pay.” It’s not always automatic. You usually have to actively notify the IRS and provide proof that the reason for the levy has been resolved.
“A levy release means my tax problem is over.” The levy release is only one part of resolving your tax issue. You need to make sure you’ve addressed the underlying tax debt.
“I don’t have to worry about a levy if I only owe a little bit.” The IRS can levy your assets regardless of the amount you owe.
“I can just ignore the levy notice and hope it goes away.” Ignoring a levy notice can lead to severe financial consequences. It’s best to take action as soon as possible.
“Levy releases are a sign of the IRS being lenient.” Levy releases are a part of the IRS’s process and are a matter of procedure. They are not doing you a favor.

Preventing Future Levies

The best way to deal with a levy release is to avoid getting a levy in the first place. Here are some tips:

File Your Taxes on Time: Filing on time, even if you can’t pay, is a must.
Pay Taxes You Owe: Pay as much as you can, as soon as you can. Even if you cannot pay all at once, be proactive in your payments
Communicate with the IRS: If you are struggling to pay, don’t hide. Work out a payment plan.
Keep Accurate Records: Keep all tax-related documents and records organized. This will save you time and prevent potential problems.
Seek Professional Advice: Consider seeking help from a tax professional, especially if you’re facing complicated tax issues.

A levy release is an important milestone in resolving a tax problem. But remember, it’s just one piece of the puzzle. The key is to be proactive, address your tax issues head-on, and take steps to avoid future problems.

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