HOW TO STOP AN IRS LEVY WITH AN
OFFER IN COMPROMISE
At least once a week someone will call our tax professionals and ask us how to avoid or stop or prevent an IRS levy. There are different ways to stop a tax levy, but one very effective way is to file an Offer in Compromise (tax settlement), and I’m going to discuss that.
Remember, an IRS levy is different than a tax lien. An IRS levy is when the IRS actually takes action against you to take your money. Yes, the IRS will seize your wages, your paycheck and/or bank account(s). A tax levy is usually a wage garnishment or a bank levy. The key difference between an IRS garnishment that seizes your wages and a bank levy is that the wage garnishment is continuous, and by that we mean that the IRS files the paperwork one time, sends it to your employer, and then they get a piece of your paycheck every time you get paid until they are paid in full.
A bank levy is just what you would expect; they take the money out of your bank account. This is often referred to as a one-time levy, which is a little misleading because they can file the paperwork over and over, but the fact is that it is not continuous meaning that when the levy hits your bank account, the IRS will seize the money in the bank account on the day the levy hits. It is not continuous, meaning if you put more money in there after the levy hits they do not get that money. You have 21 days from the dat the IRS levy hits your bank to get the money released back to you. Needless to say, you have “zero” time to lose.
THE TAX PROFESSIONALS AT FLAT FEE TAX SERVICE ROUTINELY HAVE AN IRS GARNISHMENT STOPPED AND RELEASED IN ONE DAY.
The best way to avoid an IRS levy is to get compliant and come up with a plan to solve your tax problem once and for all. However, in the real world, of course, a tax levy happens all the time and people come call our tax professionals when they are missing their paycheck.
One way to stop an IRS levy is to submit an Offer in Compromise. An Offer in Compromise is a legitimate offer to settle with the IRS. Conceptually, the idea of an Offer in Compromise is very simple, but in reality, folks need help doing it because there is an awful lot of detail involved and if you don’t do it just right, the Internal Revenue Service will reject or return the Offer in Compromise submission and you will need to re-do it or give up. The IRS hopes that you get discouraged and give up.
Here’s what the IRS Code says:
Suspension of the Tax Levy While the Offer in Compromise is Pending
1. IRC 6331(k) provides that no tax levy may be made:
• During the period that the settlement offer is pending
• For an additional 30 days after the offered settlement is rejected, and
• During the time any appeal of the rejection is pending.
2. Treasury Regulation 301.7122-1(d)(2) states that an Offer in Compromise becomes pending once it is accepted for processing. This is the date the IRS official signs the Form 656.
A couple of items to sick in your bonnet: Using an Offer in Compromise to stop a tax levy has the potential to be a real home run for you. In the short term, it can and will stop the IRS levy. And in the long term, it can actually settle your entire tax debt for less than what you owe. In other words, it can solve the bigger problem, your unpaid tax bill.
Keep in mind that it does take time to put together an Offer in Compromise. On average, it will take 10 to 12 months to complete. Some folks are impatient but “it is what it is.” When our tax professionals receive a call because of an IRS levy, it’s often an emergency-type situation. People need the tax levy lifted (stopped and released) quickly because they cannot pay their bills without their paycheck.
OUR TAX PROFESSIONALS HAVE SOME “TRICKS UP OUR SLEEVE” THAT WILL STOP THE IRS LEVY PRIOR TO THE OFFER IN COMPROMISE SUBMISSION. THIS WILL PROVIDE THE NECESSARY “STRESS FREE” TIME TO PUT TOGETHER YOUR OFFER IN COMPROMISE.
Our team doesn’t rely on on the Offer in Compromise to stop the tax levy. We have other procedures to accomplish that. Once the Offer in Compromise is submitted, the levy release will stay in place. The tax levy is stopped once the settlement offer is “accepted for processing.” Technically, the settlement offer is “accepted for processing” when the proper IRS official signs Form 656 (the Offer in Compromise form). In our experience, offers are usually processed in about two weeks after they are filed.
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