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By Michael S. Anderson of Anderson Tax Law logo for Arizona tax attorney Michael S. Anderson P.C.
  • IRS Levy – Two ways to stop it without disclosing financial information to the IRS

    IRS LEVY  – Two ways to stop it without having to give up information to the IRS directly

    File this under the additional methods to stop an IRS levy folder.

    In order for the IRS to levy your bank account or your paycheck a number of things have to have happen.  No, the IRS doesn’t have to file a lawsuit and obtain a judgement as do other creditors, but it does have to comply with a number of rules.  Primarily, the tax debt has to be assessed, and a “Final Notice of Intent to Levy” has to have been sent by certified mail to the taxpayer’s last known address more than 30 days before the levy starts.

    There are a number of ways to stop a levy once it begins.  Most of them require the IRS to ask a number of questions and the taxpayer to provide a number of answers.

    However, two legal avenues exist that will absolutely stop a levy without having to provide voluminous amount of information directly to the IRS.

    These two methods can be the quickest way to stop the levy as well.

    1.  Bankruptcy

    The filing of the bankruptcy petition creates a legal “stay” on all collections, even those belonging to the IRS.  There is no requirement that the taxpayer get the IRS’ permission to file or even disclose any information to the IRS. The filing alone stops the levy.

    Whether bankruptcy should be used is a different question of course that will depend on a number of factors.

    2.  Streamlined Installment Agreement

    If the tax debt is $50,000.00 or less, the taxpayer will not have to provide the IRS a full financial statement or answer all of the detailed financial questions normally demanded in order to obtain a levy release.

    Many Taxpayers will actually pay a tax debt down to $50,000.00 in order to avoid the more onerous disclosure rules (and a potentially higher payment plan).

    The catch – the debt has to be paid back within 72 months.

    There are many situations in which a bankruptcy or a “streamlined” installment agreement will make sense. Speak to an experienced attorney about whether it will make sense for you.