Key Takeaways
- An IRS levy allows the agency to seize wages, bank accounts, and other property to collect unpaid taxes, making prompt action essential to avoid financial disruption.
- Requesting a Collection Due Process (CDP) hearing or filing a Collection Appeals Program (CAP) appeal can immediately pause levy actions and provide an opportunity to negotiate with the IRS.
- Entering into an Installment Agreement, requesting Currently Not Collectible (CNC) status, or submitting an Offer in Compromise (OIC) are effective ways to halt levies while addressing tax debt over time.
- Demonstrating economic hardship to the IRS can result in a rapid levy release if the levy prevents you from covering essential living expenses.
- Paying your tax debt in full stops a levy immediately, though partial solutions like payment plans or OICs may be more realistic for many taxpayers.
- Preventing future levies involves timely tax filing, partial payments when possible, and seeking professional guidance to maintain compliance and avoid aggressive IRS collection actions.
Facing an IRS levy can feel overwhelming, especially when your wages, bank account, or other property is at risk. Because a levy involves actual seizure, not just a claim, it is one of the most serious actions the IRS can take. Fortunately, taxpayers have several options to halt levies and negotiate a more manageable resolution. Understanding these options and taking prompt action is crucial to preventing financial hardship and regaining control of your situation. Here is an overview of IRS levies, as well as some tips on how to stop them
What is an IRS Levy?
An IRS levy is a legal action that allows the IRS to collect taxes owed by seizing a taxpayer’s property. This can include garnishing wages, freezing bank accounts, seizing vehicles, real estate, or other personal property. The IRS typically uses levies as a last resort after several attempts to collect the debt have been made through letters, phone calls, or notices. Before a levy is issued, the IRS sends a final notice called the Final Notice of Intent to Levy. This is also known as IRS Letter 1058 and gives the taxpayer 30 days to resolve the debt.
Once a levy is in place, it can significantly disrupt a person’s financial life. For instance, wage garnishments may leave taxpayers with just enough to cover minimal living expenses. A levy on a bank account, on the other hand, can drain savings without warning. Fortunately, there are ways to stop an IRS levy, but acting quickly is key.
How to Stop an IRS Levy Immediately
If you’re facing an IRS levy, several options are available to you. However, your options may depend on your financial situation and the stage of the collection process you are in. These options range from legal actions to negotiating with the IRS.
Pay the Tax Debt in Full
The most straightforward way to stop an IRS levy is to pay off the full amount of taxes owed. Once the debt is satisfied, the IRS will release the levy, and any ongoing collections will cease. If your financial situation allows for this, it is the quickest solution. However, for many taxpayers, paying the entire balance is not realistic. In those cases, other options must be explored.
Request a Collection Due Process (CDP) Hearing
A CDP hearing is one of the most powerful tools for stopping a levy before it begins. This process becomes available after you receive the Final Notice of Intent to Levy. Filing Form 12153 within 30 days of the notice date immediately pauses levy action and shifts your case to the IRS Office of Appeals.
How CDP Hearings Work
When you request a CDP hearing, enforcement pauses while your case is being reviewed. During the hearing, you can dispute the levy, propose a payment plan, request Currently Not Collectible status, or present an Offer in Compromise. The hearing ensures that the IRS followed proper procedures and gives you the chance to explain your financial situation or propose an alternative collection method. Be aware that filing a CDP hearing request extends the Collection Statute Expiration Date (CSED)—the 10-year period the IRS has to collect your debt—so consider this factor when deciding whether to file.
Why CDP Hearings Are Effective
Filing within the 30-day window almost always stops the levy immediately. The Appeals officer assigned to your case has the authority to accept alternative arrangements, and if you disagree with the outcome, you have the right to take the matter to Tax Court. In many cases, the CDP hearing serves as a reset point, allowing taxpayers time to gather documents, become compliant with tax filings, and negotiate from a stronger position.
Note if you fail to request a CDP hearing within the 30-day window, you can still request an “Equivalent Hearing” within one year of the Final Notice date. However, if you go this route, you cannot appeal the decision to Tax Court.
Appeal Through the Collection Appeals Program (CAP)
When a levy has already started, or when the IRS denies a request for a payment plan, the Collection Appeals Program can be one of the fastest ways to challenge the action. CAP uses Form 9423 and generally receives a rapid response from the IRS.
When CAP Is Useful
CAP appeals are particularly effective when timing is critical. If your employer is about to implement a wage garnishment or your bank account is currently frozen, a CAP appeal may push the IRS to place an immediate hold on further enforcement until Appeals reviews the issue. While CAP decisions cannot be escalated to Tax Court, they move quickly and often lead to negotiation of a new payment arrangement.
Stop a Wage Garnishment
Many taxpayers first learn about a levy when their employer notifies them that wages will be garnished. Wage levies continue until the IRS instructs the employer to stop, which means the sooner you take action, the better.
How to Stop a Wage Levy
A wage levy typically stops once you enter into an Installment Agreement, obtain Currently Not Collectible status, submit a CDP request, file a CAP appeal, or pay the balance in full. Once the IRS approves an alternative resolution, it sends a levy release notice directly to your employer.
Stop a Bank Levy During the 21-Day Hold
A bank levy differs from a wage levy. Instead of taking repeated amounts, the IRS freezes whatever funds are in your account at the time of the levy. Fortunately, the IRS requires banks to hold the funds for 21 days before sending them to the government. This delay gives you a critical window to act.
Stopping a Bank Levy Before Funds Are Seized
During the 21-day window, you can contact the IRS, propose a payment arrangement, or request hardship consideration. If you enter into an Installment Agreement or qualify for Currently Not Collectible status, the IRS can fax a levy release to your bank. Because banks typically follow IRS instructions immediately, a release can restore access to your funds rather quickly.
Many taxpayers do not realize that money deposited after the initial levy date is not automatically frozen. Only the funds in the account at the time of the levy are subject to the hold.
Enter into an Installment Agreement
One of the most common solutions is to negotiate an Installment Agreement with the IRS. This arrangement allows you to make monthly payments toward your tax debt, spreading the burden over time.
Once an Installment Agreement is in place, the IRS will typically suspend any active levies. It’s important to note that interest and penalties will continue to accrue until the balance is paid in full, but this option provides immediate relief from the financial pressure of the levy. There are several types of Installment Agreements:
- Guaranteed Installment Agreement: This option is available if you owe $10,000 or less in taxes, have filed all your tax returns, and haven’t entered into an installment agreement within the last five years. If your total debt can be paid off within three years and you agree to pay the liability before the period for tax collecting expires. This is an excellent option for those who meet the eligibility criteria because approval is automatic, and it stops the levy immediately.
- Simple Installment Agreement: As of March 2025, individual taxpayers who owe $50,000 or less can establish a Simple Installment Agreement that allows repayment over the Collection Statute Expiration Date (CSED), which can extend up to 10 years. This agreement does not require financial disclosure and offers more flexibility than the previous Streamlined option.
- Non-Streamlined Installment Agreement: For debts over $50,000 or payment terms longer than 72 months, additional documentation and negotiation may be required. You may need to disclose detailed financial information to show the IRS that you can’t pay the debt immediately.
- Partial Payment Installment Agreement (PPIA): This agreement allows taxpayers to make lower payments if they cannot afford full payments. It’s structured so that payments are based on what the taxpayer can afford rather than the full balance. While the IRS may review your financial situation periodically, this can offer significant relief if you’re struggling to pay.
Request Currently Not Collectible (CNC) Status
CNC status halts all IRS collection activity, levies included, because the taxpayer cannot afford to make payments without sacrificing necessary living expenses. This option is especially useful for individuals experiencing temporary hardship.
How CNC Stops a Levy
To determine whether CNC is appropriate, the IRS reviews your income, living expenses, and assets. If it determines that paying the tax debt would cause financial hardship, the IRS places your account in “Currently Not Collectible” status. This stops levies and other enforcement actions. Although interest and penalties continue to accrue, CNC can provide immediate relief for taxpayers facing wage garnishment or bank levies.
Submit an Offer in Compromise (OIC)
An Offer in Compromise allows taxpayers to settle their tax debt for less than the full amount owed. While submitting an OIC does not automatically halt all collection, the IRS typically refrains from enforced collection while a processable offer is under review.
How an OIC Helps Stop a Levy
Once the IRS deems an OIC application complete, it generally pauses enforcement actions. If the IRS believes the offer reflects the taxpayer’s true ability to pay, it may even release an active levy. Keep in mind that OIC approval is selective, and taxpayers must provide extensive financial documentation. However, for those who qualify, it can lead to permanent resolution of the tax debt and removal of the levy.
Demonstrate Economic Hardship
If a levy prevents you from paying essential living expenses such as housing, utilities, food, or medical care, you may qualify for immediate hardship relief. The IRS is required to release a levy that causes economic hardship.
When Hardship Relief Applies
Taxpayers experiencing extreme financial pressure can contact the IRS and provide proof of their situation. After reviewing the information, the IRS may release the levy and classify the account as Currently Not Collectible or agree to another form of relief. Hardship-based levy releases are among the fastest, especially when a taxpayer provides complete documentation.
File for Bankruptcy
Filing for bankruptcy is an option of last resort that can halt IRS collection actions, including levies. When you file for bankruptcy, an automatic stay goes into effect, which temporarily stops all collections, including IRS levies. The type of bankruptcy you file will determine the long-term outcome of your tax debt. In some cases, bankruptcy can discharge older tax debts, but recent debts or those resulting from unfiled tax returns may not be eligible for discharge. Additionally, bankruptcy is a complex legal process, and its impact on your credit and financial situation should be carefully considered.
Preventing an IRS Levy in the Future
Stopping an IRS levy is crucial, but preventing one in the first place is equally important. Taxpayers can avoid levies and other aggressive collection actions by staying on top of their tax obligations and communicating with the IRS if financial difficulties arise.
- File tax returns on time: Even if you can’t pay your tax balance in full, filing your return on time can help you avoid penalties and demonstrate to the IRS that you’re making an effort to comply.
- Pay as much as you can: Making partial payments, even if you can’t pay the full amount, shows good faith and may prevent more aggressive collection efforts.
- Seek professional help: Tax professionals, such as enrolled agents or tax attorneys, can help you negotiate with the IRS, set up payment plans, or explore alternative solutions to your tax issues.
Frequently Asked Questions
How do I respond to an IRS notice of levy?
Respond immediately by contacting the IRS or filing Form 12153 to request a Collection Due Process (CDP) hearing. You can also propose a payment plan, request Currently Not Collectible status, or submit an Offer in Compromise to halt the levy. Acting quickly is essential to protect wages, bank accounts, or other property.
How long does the IRS levy last?
An IRS levy remains in effect until the debt is fully resolved, a payment plan is approved, the IRS grants Currently Not Collectible status, or the levy is released due to hardship or error. Levies can continue indefinitely until one of these resolutions occurs.
Will a payment plan stop the IRS levy?
Yes, entering into an approved Installment Agreement typically suspends active levies. However, interest and penalties continue to accrue until the debt is fully paid, so staying current with the plan is crucial to prevent levy reinstatement.
Can I stop an IRS levy if I am experiencing financial hardship?
Yes, you can request Currently Not Collectible (CNC) status or demonstrate economic hardship to the IRS. If approved, the levy will be released temporarily while your financial situation improves.
Does filing for bankruptcy stop an IRS levy?
Filing for bankruptcy triggers an automatic stay that temporarily halts IRS levies. Depending on the type of bankruptcy and the age of the tax debt, some liabilities may be discharged, but recent taxes or unfiled returns may still remain collectible.
Tax Help for Those Who Owe
Learning how to stop IRS levy action involves understanding your rights and knowing which solution applies best to your situation. Some methods, such as CDP hearings, hardship relief, Installment Agreements, and CNC status, halt levies quickly and provide space to negotiate. Others, like Offers in Compromise, may take longer but offer more permanent resolution.
Acting quickly, preparing necessary documents, and choosing the right strategy can mean the difference between prolonged financial hardship and immediate relief. With the right approach, taxpayers can stop a levy, protect their income and assets, and take meaningful steps toward long-term tax resolution. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
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