Thursday, June 18, 2009

Can I get my levy released?

If you currently have a wage or bank levy in place, you do have options to deal with it. Getting a levy released requires working with the IRS to negotiate a complete resolution to deal with your liability. In some situations though, a levy can be released due to documented financial hardship.

As a Tax Professional part of what I do is to advise clients as to whether or not they would qualify for financial hardship as the IRS defines it. Also important to consider is the type of levy in place. The type of levy will determine the ability to have the levy released, partially released or not released at all.

Wage Levy: this type of levy is sent to the taxpayer’s employer and can garnish the employee’s wages up to 85% of the take home pay. This is a continuous levy but can be released once negotiations take place.

Retirement Income Levy: similar to a wage levy, except the IRS only garnishes 15% of the take home pay. An example would be a levy on Social Security income. Again this is a continuous levy which can only be released after an arrangement is made with the IRS.

Bank Levy: a one-time levy that secures the funds in a bank account, up to the amount owed by the debtor. Most bank levies are highly unlikely to be released.

Accounts Receivable Levy: normally a levy for business owners or Form 1099-MISC recipients. This can prevent employers from paying 1099 employees any amount of money. In other words, in this case, up to 100% of the pay can be taken! For business owners, it is important to act quickly to resolve the situation so that the business isn’t forced to close due to lack of funds.

Keep in mind that states can also issue wage and bank levies and often these are much more difficult or even impossible to have released. You should do everything possible to avoid them. Some states require that wage levies remain in place until the entire liability has been paid, regardless of whether or not the debtor has made arrangements to pay or has negotiated a solution.

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