How Do I Stop a Tax Levy?

The letter that frequently drives a tax debtor to seek help is the Notice of Intent to Levy. With this notice, the agency informs the taxpayer that it will be taking the final step, and collect the tax debt directly from a third party holding the debtor’s wages, investments, or other funds due him.

Since the agency has the power to take as much of the funds necessary to satisfy the debt, or the major part of a paycheck, the tax debtor needs to move quickly first to stop the seizure or garnishment.

One of the most effective means of stopping the levy is to exercise the tax debtor’s right to a Collection Due Process (CDP) hearing. If the CDP hearing is requested by the deadline set by law, the IRS will stop the levy pending discussions with the IRS on alternatives to collecting the tax. The advantage is that this will give the client some time, generally sixty to ninety days, to examine alternatives and defenses to the tax debt.

If the hearing is requested after the deadline, the IRS generally will give the tax debtor an “equivalent” hearing and although not required to suspend the levy action, the agency has an informal policy of generally doing so.

The automatic stay feature of bankruptcy which stops collection action, including a tax levy, is also another means to protect the tax debtor’s funds from seizure.