Stop the Seizure: Steps to an IRS Levy Release

Why An IRS Levy Release Is Critical To Your Financial Stability

An IRS levy release is the official action that stops the IRS from seizing your property, unfreezing your bank accounts, or garnishing your wages. If you’re facing an active levy, you have options to stop it.

How to Get an IRS Levy Released:

1. Pay the full tax debt
2. Enter an Installment Agreement
3. Prove economic hardship
4. Settle with an Offer in Compromise
5. Wait for the Collection Statute to expire
6. Challenge an erroneous levy

An IRS levy is a legal seizure of your property to satisfy an unpaid tax debt. This can mean frozen bank accounts, garnished wages, or even seizure of your home. The IRS is required to release a levy under specific circumstances, and acting quickly is key to protecting your finances.

A levy typically follows several notices, including a final “Notice of Intent to Levy” (often Form CP90 or Letter LT11). This notice gives you a critical 30-day window to respond before the IRS can legally seize your assets. Once a levy is in place, the process is more complex, but resolution is still possible.

The official document that releases a levy is IRS Form 668-D, “Release of Levy/Release of Property from Levy.” This form is sent to the third party holding your propertyyour bank or employerinstructing them to stop the seizure.

As Attorney Samuel Landis, Managing Partner at Segal, Cohen & Landis, I’ve spent over 15 years helping taxpayers secure IRS levy releases. My expertise in IRS settlement techniques means I understand what it takes to negotiate with the IRS and get levies released quickly.

Let’s walk through how IRS levies work and the steps you need to take to get one released.

Understanding The IRS Levy: The “Why” And “How”

An IRS levy is the government’s direct seizure of your property, bank account, or paycheck to collect a tax debt. It is not a warning; it is the collection action itself. This differs from a tax lien, which is a legal claim the IRS places on your property but does not involve immediate seizure.

The IRS follows a process before issuing a levy. You will receive multiple notices, with the final one being a Notice of Intent to Levy (Form CP90 or Letter LT11). This is your last chance to resolve the issue before seizure begins. Understanding the type of levy you’re facing is essential to getting an IRS levy release.

What to Do When You Receive a Notice of Intent to Levy

Receiving a Notice of Intent to Levy is serious, but it means you still have time to act. The notice typically provides a 30-day window to respond before a levy is placed.

Do not ignore this notice. Ignoring it guarantees that the IRS will proceed with collection actions. Instead, take these immediate steps:

1. Review the details: Check the tax amount, the tax years in question, and the type of levy planned. The IRS offers guidance on Understanding your IRS Notice or Letter on IRS.gov.
2. Contact the IRS: Call the number on your notice to begin negotiating a solution before your assets are seized.
3. Explore your options: You may qualify for a payment plan (Installment Agreement), an Offer in Compromise, or Currently Not Collectible status.
4. Act within 30 days: This deadline is crucial because it preserves your right to a Collection Due Process (CDP) hearing, a formal opportunity to challenge the levy and propose alternatives. Learn more in our guide on Challenging IRS Collection Action via the Collection Due Process Appeal.

Different Types of IRS Levies

The IRS uses several types of levies, each with different rules:

• Bank Levies: When your bank receives a levy notice, it freezes the funds in your account at that moment. The bank holds these funds for 21 calendar days before sending them to the IRS. This 21-day period is your window to negotiate an IRS levy release and get your money back.
• Wage Garnishment: This is a continuous levy. Once your employer receives Form 668-W, they must withhold a portion of every paycheck and send it to the IRS until the debt is paid or an alternative is arranged. The amount taken is based on your filing status and dependents, as detailed in IRS Publication 1494.
• Federal Payment Levy Program (FPLP): This automated program intercepts federal payments like tax refunds, Social Security benefits (up to 15%), and federal vendor payments.
• Other Asset Levies: The IRS can also seize retirement accounts (using Form 668-R), rental income, accounts receivable, and physical property like cars or real estate. These are less common but are used when other methods fail.

Levies are issued through systems like the Automated Collection System (ACS). The IRS uses specific forms for different assets: Form 668-A for bank accounts and Form 668-W for wages. Third parties like banks and employers are legally required to comply with these notices. If they fail to do so, they can become liable for your tax debt. Fortunately, every type of levy can be released under the right circumstances.

Your Step-by-Step Guide To An IRS Levy Release

Securing an IRS levy release requires direct action and negotiation. The IRS would rather work out a solution than continue expensive collection efforts, and they are legally required to release a levy under certain conditions.

Your first step is to contact the IRS using the number on your levy notice. Be prepared to discuss your financial situation and explore resolution options. Your goal is to find a solution that allows the IRS to collect while protecting your ability to meet basic living expenses.

If you face difficulties, the Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help. They are a valuable resource when you’re facing significant financial hardship. For more on this, see our article on What to do when you owe the IRS but can’t pay.

Once an agreement is reached, the IRS issues Form 668-D to release the levy.

Mandatory Conditions for an IRS Levy Release

Federal law requires the IRS to release a levy if any of the following conditions are met:

• Full payment of your tax debt: The levy must be released within 30 days of paying the debt in full, including penalties and interest.
• The Collection Statute Expiration Date (CSED) has passed: The IRS generally has 10 years to collect a tax debt. If this period has expired, the levy is invalid.
• You establish an Installment Agreement: If you enter a formal payment plan, the IRS must release any active levies not permitted under the agreement’s terms.
• Your IRS Offer in Compromise is accepted: An OIC allows you to settle your debt for less than you owe. Once accepted, existing levies are released.
• The levy causes economic hardship: If the levy prevents you from meeting basic living expenses (housing, food, medical care), the IRS must release it.
• The levy was issued in error: If the IRS failed to follow proper procedure, the levy must be released.
• The property’s value exceeds the debt: If the levied property is worth significantly more than you owe, the IRS must release the excess portion.

Requesting a Release Due to Economic Hardship

Economic hardship is often the fastest path to an IRS levy release. This applies when the levy prevents you from affording necessary living expenses. To prove hardship, you must submit Form 433-A (Collection Information Statement), which details your income, expenses, assets, and liabilities.

Be accurate and provide supporting documents like pay stubs, bank statements, and bills. The IRS uses standard allowances for expenses, so your reported costs must be reasonable.

If the IRS agrees, they will release the levy and may place your account in IRS Currently Not Collectible (CNC) status. This temporarily pauses collection efforts, though interest and penalties continue to accrue. The IRS will periodically review your financial situation to see if you are able to resume payments.

Implications of a Levy Release on an Installment Agreement or Offer in Compromise

A levy release through an Installment Agreement (IA) or Offer in Compromise (OIC) requires strict compliance on your part.

With an Installment Agreement, you must make all monthly payments on time and stay current on future tax obligations. Defaulting on the agreement can reactivate the levy.

An Offer in Compromise has even stricter conditions. After your offer is accepted and paid, you must file and pay all taxes on time for the next five years. Failure to do so will default the OIC, and the IRS can reinstate the original full tax debt and resume collection actions.

Think of this type of IRS levy release as the start of a new, cooperative phase with the IRS. Both sides must uphold their end of the agreement.

The Official Release: All About IRS Form 668-D

The official document that stops a levy is IRS Form 668-D, “Release of Levy/Release of Property from Levy.” This form is the key to unfreezing your bank account or stopping wage garnishment.

Purpose and Delivery of Form 668-D

Form 668-D’s sole purpose is to notify the third party holding your assetssuch as your bank or employerthat the IRS levy is no longer in effect. For a wage garnishment, it instructs your employer to stop withholding funds from your paycheck. For a bank levy, it tells the bank to unfreeze your account and release the held funds.

The critical delivery is to the third party, as they are the ones legally required to act. You may not receive a copy of the form at the same time, so you might learn of the release from your bank or payroll department first.

What to Do After a Levy is Released

An IRS levy release is a major victory, but you should take a few follow-up steps:

1. Confirm Receipt: Call your bank or employer to confirm they have received Form 668-D from the IRS.
2. Follow Up: If your account is still frozen or wages are still garnished after a few days, contact the third party first, then the IRS if the form was never sent.
3. Keep Your Copy: Store your copy of Form 668-D in a safe place as proof of the official release.
4. Stay Compliant: If the release was based on an Installment Agreement or OIC, you must make all payments on time and stay current on future taxes to prevent the levy from returning. For help with ongoing compliance, see our tax services.

Common Misunderstandings About an IRS Levy Release

Understanding what an IRS levy release does and doesn’t do is crucial to avoid future problems.

• Myth: The tax debt is canceled.
  Reality: A levy release only stops the current collection action. The underlying tax debt remains until you pay it in full or resolve it through a program like an Offer in Compromise.
• Myth: The release is always permanent.
  Reality: A release due to economic hardship or an Installment Agreement is conditional. If your financial situation improves or you default on your agreement, the IRS can resume collection actions.
• Myth: The release is instant.
  Reality: There is a processing timeline. The IRS must generate and send Form 668-D, and your bank or employer needs time to process it. This can take anywhere from a few days to over a week.

Protecting Your Rights And Preventing Future Levies

You have enforceable rights when facing an IRS levy that can help you secure an IRS levy release and prevent future collection actions.

Taxpayer Rights and Appeal Options

The Taxpayer Bill of Rights outlines fundamental protections, including the Right to Challenge the IRS’s Position and the Right to Appeal. Your most powerful tool is the Collection Due Process (CDP) Hearing. You can request this hearing by filing Form 12153 within 30 days of receiving a Notice of Intent to Levy.

A CDP hearing is a formal meeting with an independent IRS Appeals Officer where you can challenge the levy and propose collection alternatives like an Installment Agreement or Offer in Compromise. For more details, see our guide on Challenging IRS Collection Action via the Collection Due Process Appeal.

If you miss the 30-day window, the Collection Appeals Program (CAP) offers a faster but different appeal route for levies already in place. If the IRS denies your request for a levy release, that decision can also be appealed. You can find more information in Publication 1660 about your appeal rights.

Returning Levied Property or Proceeds

If a levy occurs before you can stop it, you may be able to get the money back. If the levy was wrongful (e.g., the property was exempt or didn’t belong to you), the IRS is required to return it. You generally have two years from the date of the levy to file a claim.

If the levy was erroneous (e.g., the IRS made a procedural mistake), the IRS has the discretion to return the funds. To request the return of levied funds, you must contact the IRS and file a formal claim.

Preventing Future Levies

The best way to deal with a levy is to prevent it from happening in the first place.

• Stay Tax Compliant: Always file your tax returns on time, even if you cannot pay the full amount owed. Failure to file is viewed more seriously than inability to pay.
• Pay Timely: Pay your taxes when they are due. If you can’t pay in full, pay as much as you can to show good faith.
• Communicate Proactively: If you anticipate trouble paying, contact the IRS to explore options before they begin collection actions.
• Honor Your Agreements: If you enter an Installment Agreement or OIC, adhere to its terms strictly to avoid defaulting and reactivating collection efforts.

For help staying compliant, explore our comprehensive tax services to maintain financial stability.

Frequently Asked Questions About IRS Levy Release

Here are answers to the most common questions taxpayers have when facing an IRS levy.

How long does it take to get an IRS levy released?

The timeline for an IRS levy release varies. If you pay the debt in full, the release process is relatively quick, often taking a few days to two weeks for your bank or employer to process Form 668-D. If you secure a release through a negotiated solution like an Installment Agreement or proving economic hardship, the process takes longer, typically several weeks, depending on IRS workload and the complexity of your case.

Can the IRS levy my Social Security benefits?

Yes, through the Federal Payment Levy Program (FPLP), the IRS can continuously levy up to 15% of your Social Security benefits. However, some federal payments are exempt, most notably Supplemental Security Income (SSI). If a levy on your Social Security causes financial hardship, you may qualify for a release. You can learn more about what the IRS can and cannot seize in our article on The Federal Tax Levy: A Harbinger of Exaction.

What is the difference between an IRS levy and a tax lien?

It’s crucial to understand the difference between these two IRS collection tools. A tax lien is a legal claim against your property to secure a tax debt, while a levy is the actual seizure of that property.

A Tax Lien is filed as a public record and can damage your credit, but it doesn’t take your assets. A levy is the action of taking your money or property to pay the debt.

In short: a lien secures the debt; a levy collects it.

Understanding this distinction is key, as the strategies for resolving a lien versus securing an IRS levy release are different. If you are dealing with either, we can help you find the best path forward.