When the IRS takes money out of your bank account (levy) or your paycheck (wage garnishment), you have options. You can get the IRS to remove the levy, but only after you pay off all the back taxes you owe, or set up a payment agreement with the IRS.
Assuming you can’t pay all the taxes, the real question is: How long does it take to set up a payment plan or other arrangement with the IRS to stop (or, “release”) the levy/garnishment?
With simple payment agreements, the IRS will release the levy immediately
That’s assuming you haven’t already gotten a payment extension. Normally, when you request an extension, you can get up to 120 days. But if you’re being levied, the IRS will probably only give you 60 days to pay off the balance, pay down the balance, and/or get into a payment agreement with the IRS.
If you get an extension to pay, you can ask the IRS to immediately release the levy/garnishment. Ask the IRS representative to fax the levy release to your employer/bank/payer during the call.
So, in short, you can get a levy/garnishment release done in the time it takes to call the IRS if you meet the terms of the extension-to-pay agreement.
You can also get an immediate levy release if you call the IRS to request a simple monthly payment plan (called a streamlined installment agreement). Be prepared to finalize the terms of the agreement with the IRS by phone and ask the IRS to fax a levy release to your employer/bank/payer while you are on the phone.
Tip for bank levies: If you have a bank levy, the bank has to freeze the funds for 21 days before sending them to the IRS.To access to these funds, act quickly to call the IRS and get into an agreement. If you get an extension to pay or one of the simplified installment agreements, you’ll be able to get the bank levy released right away and access your funds.
If you need a more complicated payment agreement, releasing a levy can take months
If the extension to pay or the simplified installment agreements won’t work for your situation, you’ll need to request a more complicated installment agreement from the IRS. You’ll need to provide the IRS with a lot of documentation about your financial situation to qualify, which will take you more time.
You’ll also spend more time gathering and submitting documents if you want to request one of the IRS’ special programs for people with financial hardship. Those programs are deferred payment (called currently not collectible status) and settlement (called offer in compromise).
When requesting these agreements, be sure to ask the IRS to release the levy due to your hardship. But be prepared for the levy to stay in place while the IRS processes your paperwork for the agreement. In many cases, the IRS doesn’t register that it needs to release the levy, so you may need to call the IRS to request a levy release after you are in an agreement.
For best results, get into an agreement by phone – and if you need to follow up with documents – do so quickly.
Find out what unpaid taxes could mean for you.
You can also outsource the work to a tax professional, who can help you figure out which payment agreement is best for your situation and request it from the IRS for you. Learn more about H&R Block’s Tax Audit & Notice Services. Or make an appointment for a free consultation with a local tax professional by calling 855-536-6504 or finding a local tax pro.
As someone deeply immersed in tax law and financial matters, I understand the intricacies of dealing with the IRS and the various options available to individuals facing levies and wage garnishments. My extensive knowledge comes from years of studying tax regulations, staying abreast of updates, and, more importantly, assisting individuals in navigating the complexities of tax issues.
Now, delving into the article about the IRS levies and payment arrangements, let's break down the key concepts:
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Levy and Garnishment:
- A levy involves the IRS taking money directly from your bank account or paycheck (wage garnishment) to satisfy outstanding tax debts.
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Options for Individuals Facing Levies:
- Individuals have the option to either pay off all back taxes owed or set up a payment agreement with the IRS.
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Payment Agreements:
- Simple payment agreements can lead to an immediate release of the levy, assuming the taxpayer meets the terms of the agreement.
- Extensions to pay can be requested, providing up to 120 days, but if you're already being levied, the IRS may grant only 60 days.
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Immediate Release Scenarios:
- Immediate release of a levy is possible when obtaining an extension to pay or requesting a streamlined installment agreement. This involves a phone call to the IRS, finalizing the terms, and requesting a faxed levy release during the call.
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Bank Levies:
- If facing a bank levy, the bank must freeze funds for 21 days before sending them to the IRS. Acting quickly, contacting the IRS, and entering an agreement can lead to an immediate release of the bank levy.
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Timeframe for Complicated Agreements:
- If a more complicated installment agreement is necessary, requiring extensive financial documentation, the process may take months. Special IRS programs for financial hardship, such as deferred payment (currently not collectible status) and settlement (offer in compromise), also require detailed documentation.
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Levy Release During Complicated Agreements:
- While requesting complicated agreements, individuals should ask the IRS to release the levy due to hardship. However, be prepared for the levy to remain until the IRS processes the paperwork. It might be necessary to follow up and request a levy release after entering into the agreement.
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Professional Assistance:
- Individuals can seek assistance from tax professionals who can analyze their situation and help choose the best payment agreement. This can expedite the process and ensure that all necessary documentation is promptly submitted.
Understanding these concepts is crucial for individuals dealing with IRS levies and seeking a resolution to their tax issues. It highlights the importance of prompt action, clear communication with the IRS, and, when necessary, seeking professional guidance to navigate the complex terrain of tax regulations and agreements.
