Levies (Garnishments) And Releases Of Levies
What is a levy?
A levy is a legal seizure of your property to satisfy a tax debt. The IRS has the power to levy just about anything of value but the most common levies we see are bank and wage levies.
A bank levy is a one day levy. The IRS contacts your bank, freezes your funds and requires the bank to hold them for 21 days before being forwarded to the Service. Any funds going into your account after the levy day are available to you until a new levy is issued. Once the funds are sent to the IRS, it is very hard to get them back in any timely manner.
A wage levy or garnishment is an ongoing levy. The IRS contacts your employer and requires them to send a portion of your wages every pay period to the IRS to apply against your tax debt. Once wages are seized, there is no getting them back without going through the proper, very long and drawn out channels.
Release of levy
It is possible to get a levy released although usually much easier to keep it from being issued than to get it released. This means that the problem should be dealt with sooner rather than later.
Many times the levy is issued to force the taxpayer into dealing with the tax issue. The IRS can send out blizzards of letters that get ignored but when someone’s money is snatched, it gets attention! Here are some release options:
Financial hardship – If a levy causes undue financial hardship, the IRS must be called and financial information given before it is released.
Complying with information requests – If a taxpayer has been asked repeatedly for tax returns or financial information and has not been forthcoming, the Service will issue a levy. Many times it will be released when the taxpayer becomes more cooperative.
Filing an Offer in Compromise – Once an offer is filed, the IRS is prohibited from taking any collection action against the taxpayer.
Filing Bankruptcy – The bankruptcy laws are very clear that when a person is in bankruptcy, no creditors can contact or harass them. At filing, any levies will be immediately lifted. However, in order to be discharged in bankruptcy, tax debt must meet very specific requirements and most tax debt is not dischargeable.
Negotiate an acceptable payment arrangement. Pay the debt in full.