By Ralph Nelson, EA, Kenny Kim, EA, MD
Taxpayers come into our office after their bank accounts or wages have been levied by the IRS. They ask us, "what can we do to make the IRS stop the levy action?"
Here are three ways to make the IRS tax levy go away.
Step #1. File your last six years of tax returns; if not filed.
Step #2. Be current with your tax payments (e.g., estimated quarterly tax, payroll tax).
Step #3. Ask the IRS to stop the levy action.
Steps #1 and #2 are prerequisites for step #3. In other words, the IRS will not engage in a conversation requesting the levy action to stop until steps #1 and #2 have been completed.
#1: Filing the last six years of tax returns
Ensure that the last six years of your tax returns have been filed. If you have more than six years of unfiled tax returns, you only need to file the last six years to be considered "compliant" by the IRS. (Caution, your state may require more than six past returns to be filed.)
#2: Being current with your current tax payments
Ensure that all required taxes are paid to the IRS, including estimated quarterly taxes and payroll taxes. The IRS will accept an Offer in Compromise only if the taxpayer shows that they are making a good faith effort to resolve their tax debt with the IRS. Since both an installment agreement and an offer-in-compromise (OIC) require that the taxpayer remain tax compliant, steps #1 and #2 are critical to #3.
#3: Ask the IRS to stop the levy action.
When steps #1 and #2 are completed, you (or someone on your behalf) must communicate with the IRS. The IRS needs to know that you understand the situation and intend to work with them. Critical to that is calling the IRS, letting them know you are filing any missing returns, getting your current tax payments in, and submitting a proposal to resolve the tax debt. In so doing, you could avoid having the IRS (or other enforcement agencies) issue a collection action (levy) against you and/or your assets.
If you have any questions about IRS tax lien issues or other IRS tax issues in the Bay Area, please feel free to contact us at (510) 828-6215 (Ralph); (341) 766-1247 (Kenny) or by checking out our website, www.financial-harmony.com