There are several ways to avoid an IRS levy without paying your full tax liability.  You’ll need to request a Collection Due Process (CDP) hearing before the appropriate deadline if you want to stop the bank levy, wage garnishment, or another type of IRS tax levy.  The most common ways to stop a levy are: dispute the tax liability, request an Installment Agreement, submit an Offer in Compromise, apply for Innocent Spouse Relief, make a case for Financial Hardship.  Read on to find out more about CDP hearings and the options available to you to stop a levy.

Request The CDP Hearing

Before levying your property, the IRS must first (most of the time) send you a notice and give you 30 days to request a hearing.  Only under rare circumstances can the IRS seize your property without sending one of these notices.

If you receive a CDP notice, keep the following information in mind:

• You must request the CDP hearing in writing
• You must request the hearing within 30 days of the date of the notice
• You lose important rights if you miss the deadline

For more information about CDP hearings, what they are and how they can help you, check out our blog which should answer all of your questions.

Contact a tax attorney if you receive any IRS notice regarding a levy or CDP rights.

Options For Avoiding A Levy

If you can’t pay your tax debt in full, you have several options for avoiding an IRS levy.  A tax attorney can help you determine which option best fits your situation.

Dispute The Tax Liability

If you have a reason to dispute the existence or amount of the tax, you can do so at a CDP hearing.  However, you can’t dispute the tax if you’ve already been given the opportunity and failed to do so.

Installment Agreements

The IRS will stop levy actions if you negotiate an installment agreement.  An installment agreement is essentially a payment plan between you and the IRS whereby you make monthly payments, chipping away at your tax debt.  There are many different types of installment agreements, but you generally need to pay off your full balance within six years or by the collections statute expiration date, whichever comes first.

Offers In Compromise

If you can’t afford to make monthly payments, you may be eligible for an Offer in Compromise (OIC).  An OIC is a way to settle your tax debt for less than you actually owe.  Oftentimes, you can settle for A LOT less than you owe, though that is not a guarantee.  Not everyone qualifies for an OIC and you should definitely consult with a tax attorney to see if you do.  Added bonus: The IRS will not levy your assets while your offer is being considered (which can take anywhere from 6 months to a year).  If your offer is accepted, your tax debt will be settled as long as you pay your offered amount in a certain time frame and as long as you meet other certain conditions

Innocent Spouse Relief

There are three types of innocent spouse relief.  If you request any type of innocent spouse relief, the IRS will halt most collection activities until your request is resolved.

Financial Hardship

If you are experiencing a financial hardship, you can ask for your account to be classified as “Currently Not Collectible,” or CNC.  Penalties and interest will continue to be added to your balance each month, but the IRS won’t levy your assets or wages.

Executive Summary:

CDP Hearings

• • Typically, the IRS will send you a notice before levying your property
  • Once you get the notice, you have 30 days to request a hearing
    • request must be done in writing
    • request must be done within 30 days of date on the notice
    • you lose important rights if you miss the
      

      Options For Avoiding a Levy

      • There are many viable options available:
        • Dispute the tax liability
        • request an Installment Agreement
        • submit an Offer in Compromise
        • apply for Innocent Spouse Relief
        • make a case for Financial Hardship
      • Whichever option is best for you will depend on certain factors

Have a question? Contact Venar Ayar.