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Posted on Feb 9, 2009 in Offer in Compromise, Tax Q&A | 0 comments

Will a Levy Be Released After I Submit My Offer in Compromise

When you submit an offer in compromise to the IRS all collection activity that was planned against you in the future will be stopped and the IRS will not come after you while the offer in compromise is being considered.  This rule only applies to those collections when you do not already have a levy in progress when your offer in compromise is submitted to the IRS.  The IRS wants you to be able to try to work out your offer in compromise and the Internal Revenue Code protects you during that process.

In the past, the IRS has released a levy that is already in place when you submit an offer in compromise.  However, they are not required to and if a levy is already in place it may take several weeks before a release can be obtained.  The first thing that has to be done is that we have to wait for the IRS to receive your offer in compromise and we have to receive a letter back from them that states the offer in compromise has been received.  This will be our proof to the IRS that an offer has been submitted when we call and request the levy to be released.  It usually takes at least 30 days from when we submit the offer in comproimse to receive this letter.

Our first attempt will be to call the collections department of the IRS and ask them to release the levy.  This used to be pretty easy; however, in the past several months we have noticed the IRS getting much stricter and not releasing these levies even after the offer in compromise has been received.  Technically, they do not have to and they are sticking with this.  I have appealed it to their managers and supervisors and have not had any luck.  Where we have had some luck is in contacting the Taxpayer Advocate Service in this situation.  A levy is supposed to be released when it causes an economic hardship on a taxpayer and that is generally our best argument along with the fact that the offer in compromise has been submitted.

So, if you are receiving collection notices from the IRS and contemplating an offer in compromise, I would recommend that you go ahead and get moving with the offer because once the IRS begins collecting through a levy on your wages it is much more difficult (and definitely not a guaranteed thing) to get released.