| The IRS sends the levy notice to the taxpayer's bank, | | | | taxpayer is experiencing an "extreme financial |
| which orders the bank to hold the money in the | | | | hardship." |
| taxpayer's account(s) for 21 days. The bank is legally | | | | An "extreme financial hardship" occurs when the funds |
| obligated to honor the levy. No one can access the | | | | within the bank account are needed for a specific |
| funds during this period. The 21-day period provides an | | | | reason. The reason must relate to allowable expenses, |
| opportunity for the taxpayer or his/her representative | | | | which are those expenses necessary for the health or |
| to contact the IRS and negotiate for a release of the | | | | welfare of the taxpayer, or for the production of |
| funds controlled by the levy. Once the 21-day period | | | | income. Usually, if proven, the IRS will release the bank |
| passes, the funds are remitted to the IRS. | | | | levy up to the amount necessary to pay for the |
| Any money deposited after the receipt of the levy is | | | | allowable expense. |
| not frozen by the levy. The taxpayer should have full | | | | Here are some examples that could demonstrate an |
| access to the deposited funds. The IRS can only get | | | | extreme financial hardship:o Notice of Evictiono Notice |
| any subsequent funds deposited by a taxpayer after | | | | of Foreclosureo Shut-Off Notice (i.e. electricity, water, |
| issuing another bank levy. | | | | phone, etc.)o Notice of Repossessiono Upcoming |
| Releasing an Income Levy | | | | Medical Procedureso Necessary Travel Expenses for |
| The IRS will not release an income levy unless a | | | | Employmento Payroll for Business |
| taxpayer resolves his or her back tax liability. The | | | | Releasing a Levy through Filing an Offer in |
| taxpayer can resolve his or her back tax liability | | | | Compromise |
| through Full Payment, an Offer in Compromise, an | | | | You can also get a levy released by filing an Offer in |
| Installment Agreement, or through placement in | | | | Compromise. However, the IRS will only release a levy |
| Currently Not Collectible status. | | | | after an Offer in Compromise has been "deemed |
| Thus, for the most part, a taxpayer does not need not | | | | processable" by the IRS Centralized Offer in |
| engage in any special process to release an income | | | | Compromise (COIC) Unit. This means that the IRS |
| levy. However, a taxpayer does need to respond | | | | COIC Unit has determined that the filed Offer in |
| quickly to any IRS requests for documents, so that | | | | Compromise has met all procedural requirements. |
| their case can be resolved before the a levy is | | | | Unfortunately, releasing a levy through filing an Offer in |
| imposed. | | | | Compromise is not an exact science. A taxpayer |
| Releasing a Bank Levy - Extreme Financial Hardship | | | | must rely upon the IRS COIC Unit to notify the |
| Because a bank levy is a one-time event and the | | | | department that issued the levy (i.e. ACS, Revenue |
| amounts within bank accounts are typically small, the | | | | Officer, etc.) that it has received a processable Offer |
| IRS will not always release a bank levy after entering | | | | in Compromise. A taxpayer must also rely upon the |
| into an Installment Agreement or proving a financial | | | | IRS COIC to ask that department to release the levy |
| hardship (i.e. Currently Not Collectible status). Instead, | | | | so that IRS COIC may accurately consider the |
| the IRS will typically release a bank levy only if the | | | | taxpayer's financial situation. |