Taxation & Estate Planning

Preventing an IRS Bank Levy

By Darrin Mish

An IRS bank levy is like a nightmare come true because once you are slapped with one, you cease to have control over your own assets.  On the other hand, it also costs the IRS a lot of money and time as well.  The best way to deal with it is to avoid letting things get this far.  Here are some tips to help you pre-empt a bank levy.

The first step in avoiding a bank levy is for you to respond as quickly as possible when you realize you have an outstanding tax bill.  In almost every case, a bank levy is issued when a person refuses to communicate with the IRS.  Some taxpayers refuse to respond to the IRS because they feel they are unfairly given a large tax amount.  On the other hand, the IRS gets more unsympathetic towards you the more you ignore them.  So even if you do feel unjustly treated, it is better to pay what you owe and then fight the system, rather than have a stand-off with the IRS.

When responding to the IRS, propose a payment plan to clear your debt.  The IRS will usually agree to it provided the amount repaid is reasonable and your tax debt can be paid off within 12 months at most.  They wouldn't want you to carry forward your tax to the following year. In some circumstances, the IRS may offer you a longer payment plan, but generally speaking, they want to keep your tax debt current.

If you cannot even afford a payment plan, then consider applying for an Offer in Compromise.  This is a provision in the tax code that allows you to pay less than 100% of your tax debt as full settlement, under certain circumstances.  In truth, only a handful of people will be accepted for a compromise, so be realistic about your chances.  Yet you should still consider it as a viable option.

The first kind of compromise is simply an inability to pay your debt because you hardly have enough for basic living expenses.  The reduced amount you are to pay depends on the IRS' assessment of your financial situation.  They will then adjust your tax bill to reflect what you can reasonably pay.  The second kind of offer has to do with possible errors on your tax forms that may have mistakenly increased your tax bill.  A third type of Offer in Compromise is where you can pay a lump sum payment that the IRS considers a reasonably high percentage of your total bill and consider your tax debt settled.

Needless to say, the IRS has stringent conditions set out for these Offers in Compromise; you are going to have to prove that you qualify.   One benefit, however, while processing an offer, any bank levy will immediately be lifted.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Preventing an IRS Bank Levy is a post from: IRS Tax Problem Solver Blog - IRS Help

Full post as published by IRS Problem Solver Blog on March 07, 2010 (boomark / email).