The IRS accommodates a variety of opportunities to stop, reverse or reduce a bank levy. Some options aren’t suitable for all taxpayers. Consult with a qualified tax professional to learn about the options available in your individual circumstances. All taxpayers have access to at least one of the following options:
Lump Sum Payment in Full
If no response is received by the taxpayer after the 21-day period in which the bank has frozen his or her account, the IRS takes possession of the funds and applies it to the outstanding balance in your tax case. However, if the taxpayer responds to the IRS with payment in full, including interest and penalties, the IRS will remove the levy from his or her bank account.
Collection Due Process Hearing
Included in the envelope with the Final Notice of Intent to Levy is a Notice of Your Right to A Hearing. This notice is in reference to a Collection Due Process hearing with the IRS.
The hearing gives the taxpayer an opportunity to express why he or she believes the levy shouldn’t be executed. It’s common for hearings to have favorable outcomes if one of the following is the case:
- The Final Notice of Intent to Levy was issued in error because the taxes have already been paid in full,
- The taxpayer has an open bankruptcy proceeding,
- The deadline to collect on the tax has passed, or
- An administrative error initiated the levy process.
Extraordinary Financial Hardship
Determining the severity of financial hardship is subjective for everyone. Therefore, hard and fast guidelines for declaring financial hardship are far and few between. Discuss your circumstances with a tax professional to most effectively present an explanation of your hardship to the IRS.
If the IRS agrees to lift the levy due to financial hardship, they’re likely to cease further collection efforts until the taxpayer is back on his or her feet.
The IRS may lift a bank levy if suitable payment arrangements are agreed upon. This may be done in installments or an offer in compromise. Collection efforts are not exerted while the taxpayer makes monthly payments on his or her back-tax debt, including further attempts to levy bank accounts and wages.