By Michael T. Breen, EA Plaistow, NH

An IRS wage levy is usually served to a taxpayer’s employer not only as a means to collect back taxes, it is also used as a tool by IRS to get the taxpayer’s attention to take some type of action. In many circumstances an IRS wage levy is served because the taxpayer did not respond to mail from the IRS, had contacted the IRS and made a commitment to take some type of action, such as filing back tax returns, provide a collection information statement, submit an offer in compromise by a certain timeframe and failed to do so. Serving the wage levy assures the IRS that the taxpayer will be contacting them to resolve their IRS matter. The IRS uses the wage levy as leverage to get the taxpayer to perform the action they are seeking from the taxpayer, such as filing back tax returns, providing a collection information statement or submitting an offer in compromise. The quickest way to get your wage levy released is to contact the IRS, offer an explanation as to why you missed your deadline, establish a new deadline and deliver on it. This approach usually produces good results in getting your wage levy released. However, in some cases that doesn’t always hold true. However, under the law when certain circumstances are present, the Internal Revenue Service must release the wage levy and are as follows:

The Statute of Limitation on Collection has Expired – Generally, the statute of limitations the IRS has to collect from a taxpayer is 10 years from the date of assessment. If for example, you filed your Form 1040 for the year 2005 on July 24, 2006 and the IRS assessed the tax on the same day, the collection statute would be scheduled to expire after July 24, 2016 which is 10 years from the assessment date of July 24, 2006. Therefore, if you still owed the IRS $15,000 on July 1, 2016 when an IRS wage levy was served, by operation of law that wage levy must be released after July 24, 2016 as the tax of $15,000 is no longer legally due. It is important to know that certain actions such as filing an offer in compromise, filing bankruptcy and requesting a collection due process hearing will extend the statute of limitations.

The Release of Levy will Facilitate Collection  In example, Donald owes the IRS $5,000. His employer was served with a wage levy. Donald has an available home equity line of credit of $20,000 that he cannot access because he is 3 days late on his payment as a result of the wage levy. If the IRS released the wage levy, Donald could make the payment on his home equity line of credit, then have access to the line of credit and pay the IRS in full.

Bankruptcy prohibits a wage levy. Generally, levying on the wages of a taxpayer violates the automatic stay and the wage levy must be released.

Collection Due Process Hearings prohibit a wage levy from being issued while the taxpayer’s Collection Due Process Hearing is pending.

Economic Hardship means the taxpayer will be unable to pay their reasonable necessary living expenses. An IRS wage levy is required to be released when the IRS determines the levy is creating an economic hardship. To make your case for release, financial information will be required to be submitted to the IRS by phone or correspondence. The IRS may require you to furnish supporting documentation to determine if an economic hardship exists. Generally, if you are dealing with a Revenue Officer, you will complete a Form 433-A Collection Information Statement for Individuals http://www.irs.gov/pub/irs-pdf/f433a.pdf  and provide verification of the last three months necessary living expenses such as copies of rent, mortgage, utilities, car payments, car operating expenses, health insurance, etc. If you are dealing with the IRS/ACS Automated Collection Services, you will be more than likely giving this financial information over the phone to the IRS/ACS employee. They may request that you fax them proof of documents. If you are dealing with the IRS/ACS division of the IRS plan to spend a few hours on the phone. Although time consuming, it is time well spent because in most cases you will get your decision right then and there. Generally, wage levy releases are mailed to the taxpayer’s employer. However, when time is of the essence such as another paycheck is due in a few days, the IRS may fax the release to your employer. Make sure you have the appropriate contact information for your employer’s  Human Resources Department  and a fax number before you make the call to the IRS.