The ability to levy on the assets of a tax debtor that has failed to meet his or her federal tax obligations is one of the major enforcement remedies the Internal Revenue Service (IRS) has at its disposal. Generally speaking, levies that are not continuous wage levies and is served prior to the expiration of the collection period is enforceable and ought not be released. Internal Revenue Service, Internal Revenue Manual, 22.214.171.124.1.2 (08-24-2010), Statutory Collection Period Expired, available at https://www.irs.gov/irm/part5/irm_05-011-002.html#d0e412. However, in some circumstances the law requires that an IRS-imposed federal tax levy be released, and there are a number of express conditions that if satisfied necessitate the release of the levy.
To begin with, a levy must be released where the IRS determines that the underlying debt was satisfied in full, if it is determined that the statutory collection period expired before the levy went into effect, or if the levy prevents the taxpayer from paying for basic necessities for his or her family or is creating economic hardship. Additionally, a levy must be released where it is determined by the IRS that the release of the levy will actually facilitate collection of the underlying tax debt. For example, if a taxpayer wants the levy released, he or she may opt to post a bond in order to pay the outstanding tax debt in full, but the taxpayer will need access to the assets that are the subject of the levy to obtain the bond, and the IRS will be required to release a levy in such circumstances. Where the IRS levies on property that is much more valuable than the actually outstanding tax obligation, a portion of the levy property must be released when it can be released without hindering collection.
Subsequent alternative arrangements with the IRS may also warrant the release of a levy, though it may depend in large part on the circumstances of the agreement. Installment agreements entered into between the taxpayer and the IRS will often result in the release of the levy, though it is possible to enter into an installment agreement that permits an IRS levy. That said, it is often the case that a taxpayer will enter into such an agreement in order to have the levy released and the lien lifted, and in most cases this will be the taxpayer’s reward for getting back on track with the IRS and instituting a payment plan.
To learn more about the grounds for releasing an IRS levy on a taxpayer’s assets, consult an experienced tax attorney with knowledge of federal tax law.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.