Just what is an IRS levy? You would usually be subject to an IRS levy only when all efforts by the IRS to collect taxes from you have failed. Thus, an IRS levy is the last straw when it comes to collecting back taxes. It is a tool that will freeze your assets so that the IRS can remove as much money from your bank accounts as they need to pay off your tax debt. Although it is the final means of retrieving taxes from you, an IRS levy can still be reversed. Click here to watch or read more information on IRS Back Taxes.
The first thing to do would be to contact the IRS and discuss with them a payment plan. Accepting a payment plan will immediately lift the levy on your accounts so that you have access to your checking and savings; but the payment plan will usually take effect immediately. You could just agree to a payment plan so that your levy is reversed, giving you more time to think of what do in the long run.
If a payment plan is not right for you, you should consider applying for an Offer in Compromise. This offer is not granted to most people because in an Offer in Compromise you are allowed to pay less (at times significantly less) than what you owe. There are three main ways to qualify for an offer in compromise. The first way is to show that an IRS levy would impose intolerable hardship upon your family and you would not be able to meet your basic needs such as food, shelter, medicine and child support.
The second way to be eligible for an offer is by proving that you do not have the means to pay off your tax debt by the deadline. In such a case, the best thing to do is to suggest a lump sum payment that is close enough to the total tax debt that you owe. If the IRS is agreeable to the sum that you propose, they will accept your offer and cancel the remainder of your tax debt.
The final way is to prove that your tax bill actually isn’t yours. If you show them a genuine mistake in calculation or some form of human error occurred, then you may qualify to have some or even all of your debt removed.
The key here to doing away with an IRS levy is to keep the all channels of communication open so that you are always making headway positively.