The IRS has numerous means to satisfy a taxpayer’s outstanding federal tax liabilities. One of the most effective and commonly utilized methods is a levy upon a taxpayer’s personal property, wages, and salary. The issuance by the IRS of a levy upon the taxpayer’s personal property, or income can have devastating financial consequences for the taxpayer.
However, the IRS is obligated to release levies under specified circumstances. Set forth below are the most common circumstances when the IRS must release a notice of levy:
- A levy upon property of a taxpayer in bankruptcy. Generally levying on property when the taxpayer is in bankruptcy violates the bankruptcy automatic stay and the levy must be released;
- A levy that violates the Internal Revenue Code or regulations, such as a levy issued while the taxpayer’s Collection Due Process (CDP) hearing is pending violates the Internal Revenue Code or regulations and must be released;
- When the IRS determines the liability is satisfied by full payment, i.e., is no longer owed;
- When the Service determines the levy was issued after the statutory collection period has expired. A continuous wage levy served before the expiration of the collection statute must be released upon the expiration of the collection statute;
- When the Service determines the release will facilitate collection of the amount that is owed;
- When the IRS determines the levy is creating an economic hardship, i.e., the levy will cause the individual to be unable to pay their reasonable necessary living expenses. The determination of a reasonable amount for basic living expenses will be made by the IRS and will vary according to the unique circumstances of the individual taxpayer. Unique circumstances, however, do not include the maintenance of an affluent or luxurious standard of living. The decision to release a levy due to economic hardship requires financial analysis which requires sufficient financial information to confirm the levy is causing the taxpayer to be unable to meet necessary living expenses. To determine whether the financial information submitted by the taxpayer is sufficient to establish an economic hardship each levy should be considered independently;
- When the IRS determines the fair market value of the levied property exceeds the amount owed and a portion of the levied property can be released without hindering collection;
- If the IRS entered into an installment agreement with the taxpayer, unless the agreement allows for the levy;
- Wrongful levies. A “wrongful levy” is one that improperly attaches property belonging to a third party in which the taxpayer has no rights, and should be released; and
- Erroneous levies. An “erroneous” levy is one that properly seeks to capture a taxpayer’s property (rather than a third party’s property), but, for example, is served prematurely or otherwise in violation of an administrative procedure or law, and should also be released.
Our Law Office can assist a taxpayer in convincing the IRS to release a levy on one or more of the above-listed grounds. These are all factually-intensive arguments requiring our Law Office’s experience and skills to successfully manage on your behalf.