A levy is one of the most serious collection actions the IRS can take to settle unpaid taxes. If you receive a Final Notice of Intent to Levy (Letter 1058 or Notice LT11), you want to take immediate action.
Although it is best to pay your tax debt in full if you can, tax resolution services can also help keep the IRS from taking money from your paycheck and bank accounts or seizing other personal assets.
From instant resolution to long-term solutions, we will review ten strategies to resolve a tax levy, protect your finances, and get you back on track while you address your IRS debt.
1. Pay the Debt in Full for Instant Resolution
Paying your tax debt in full is the quickest and easiest way to stop an IRS levy in its tracks. You will need to pay the debt and any interest and penalties for the IRS to release the levy.
They will usually do this very quickly as the debt has been cleared up and no further action needs to be taken.
While paying in full is difficult for many people, some turn to their savings and/or assets to satisfy the debt for the levy to be removed.
If you can pay the debt in full, make sure you receive a formal levy release notice confirming that the IRS will stop collections.
Action Steps:
- Log in or create an IRS account at irs.gov/payments.
- Use Direct Pay (from checking/savings) or debit/credit card to pay in full.
- After payment, call the IRS at the number listed on your levy notice to request a formal levy release notice.
- Confirm receipt of IRS Form 668-D (Release of Levy/Release of Property from Levy).
2. Request a Levy Release for Economic Hardship
If you are not able to pay your IRS debt in full and the levy is causing immediate financial hardship, call the IRS number on your levy notice to explain your situation and request an immediate levy release.
They must release a levy by law if you can show it is preventing you from meeting your basic living expenses, such as food, rent/mortgage, and electricity.
Action Steps:
- Call the IRS at the number on your Levy Notice (LT11 or Letter 1058).
- Explain how the levy is creating economic hardship (e.g., inability to pay rent, food, or utilities).
- Be ready to submit Form 433-F or 433-A to provide a financial disclosure: Form 433-F
- Request the IRS issue a levy release due to hardship.
3. Set Up an Installment Agreement
The IRS understands that full payment is not always possible. You may be able to set up an installment agreement (monthly payment plan) that releases the levy.
You will pay your tax debt over time, chipping away at it in a more manageable way.
Payment terms range from 6 months to 72 months depending on how much you owe, what the IRS determines you can afford to pay every month, and whether you use Direct Pay.
Make sure you keep up with payments, as missing a payment and defaulting could cause the IRS to reinstate the levy.
Action Steps:
- Apply online at IRS Online Payment Agreement.
- Choose your plan type: Short-term (≤180 days) or Long-term (up to 72 months).
- To qualify for automatic approval, you generally must owe $50,000 or less and have filed all required tax returns.
- After acceptance, request levy release referencing your new installment plan agreement.
4. Submit an Offer in Compromise (OIC) to Settle for Less
An Offer in Compromise (OIC) is an agreement between you and the IRS that allows you to settle your debt for less than the full amount owed.
If you can prove that you cannot ever afford to pay the full balance, submitting an OIC can reduce your debt, give you more time to make payments, and remove wage garnishments and bank levies.
How much the IRS will agree to lower your taxes owed depends on what they determine to be your “ability to pay” when they review your monthly income and expenses as well as equity of assets.
Action Steps:
- Use the Wiztax Offer in Compromise Pre-Qualifier Tool: com/pre-qualifier/
- Download and complete Form 656 and Form 433-A(OIC): Offer in Compromise Booklet
- Submit your offer along with the application fee and first payment, unless you qualify for a low-income waiver.
- While the OIC is pending, collection efforts—including levies—are typically suspended.
5. Request Currently Not Collectible (CNC) Status to Pause Collections
If your financial situation means you cannot pay anything toward your tax debt right now, you can request to be placed in Currently Not Collectible (CNC) status.
If the IRS agrees to mark your account as CNC, all collection efforts will be paused, and they cannot start a levy until your financial situation improves.
While Currently Not Collectible status gives you some breathing space, it is important to note that CNC is temporary, and interest and penalties will continue to accrue.
Action Steps:
- Call the IRS and request to be marked as Currently Not Collectible.
- Complete and submit Form 433-F or Form 433-A for financial evaluation.
- While in CNC status, collection actions are paused but interest and penalties continue to accrue.
6. Request Innocent Spouse Relief (Form 8857) for Your Spouse’s Debt
If your levy is the result of your spouse or ex-spouse underreporting income or making a tax error, you may be eligible for Innocent Spouse Relief.
You’ll need to submit Form 8857 to request that the IRS relieve you from the responsibility of a joint tax debt.
If they agree, any further collections, including a levy, will focus only on the person who incurred liability.
Action Steps:
- Complete and submit Form 8857 (Request for Innocent Spouse Relief)
- Include details about why you should not be held liable for your spouse or ex-spouse’s tax debt.
- The IRS may take 6 months or more to review, but collections against you may be paused during this time.
7. Request Penalty Abatement to Reduce the Tax Liability
One of the biggest surprises for taxpayers with IRS levies is how quickly the balance increases with penalties. If your balance is growing due to failure-to-file or failure-to-pay penalties, you may be able to request penalty abatement to reduce how much you owe.
For example, if you have a clean tax history or are experiencing financial hardship, the IRS will consider waving first-time penalties.
Penalty amounts can be as high as 25% of the tax due depending on how late you file and pay.
Action Steps:
- Call the IRS or send a written request to ask for first-time penalty abatement or reasonable cause relief.
- If eligible, penalties such as failure-to-file or failure-to-pay may be removed or reduced.
- Use IRS Penalty Relief Info for guidance.
- Supporting documentation may include prior tax compliance history or proof of hardship (e.g., illness, unemployment).
8. Appeal the Levy with a Collection Due Process Hearing
Everybody has the right to appeal an IRS levy. If approved by the IRS, your appeal can stop the levy temporarily while you resolve the issue or your case is heard.
You will need to request a Collection Due Process (CDP) hearing within 30 days of receiving a Final Notice of Intent to Levy. Use Form 12153 to request a CDP hearing.
Action Steps:
- File Form 12153 (Request for a Collection Due Process or Equivalent Hearing) within 30 days of receiving a Final Notice of Intent to Levy.
- Mail or fax it to the address listed on your levy notice.
- Choose your appeal grounds (Installment Agreement, OIC, CNC, or dispute the underlying tax).
- Appeals will generally suspend the levy while your case is reviewed.
9. Request IRS Audit Reconsideration to Dispute Incorrect Tax Assessments
If you believe that an incorrect IRS assessment or audit triggered your levy, you can challenge the underlying debt through Audit Reconsideration.
To do this, send a letter to the address of your last IRS notice stating that you want them to reconsider the audit assessment.
There is no specific form, just include a copy of your audit report and documents that support your request.
The IRS may agree to pause levies while they review the audit and reconsider the tax assessments.
Action Steps:
- Send a written Audit Reconsideration Request to the IRS office that issued the audit.
- Include:
- A copy of your audit report (if available)
- Explanation of what you disagree with and why
- Supporting documents (e.g., receipts, W-2s, 1099s)
- More info here: IRS Audit Reconsideration Guide
10. Consult with a Tax Attorney Regarding Discharge If You are in Bankruptcy
If you are facing bankruptcy, which can be a challenging enough time on its own, there are things you can do if you are hit with a tax levy.
Filing for bankruptcy triggers what is known as an automatic stay. This court order immediately stops any collection actions, including wage garnishments and bank levies, while your bankruptcy case is active.
Additionally, a tax attorney can help by reviewing your situation to determine whether you tax debt can be discharged.
Facing an IRS levy is overwhelming. The key is to be proactive and not ignore the IRS. They will work with you to resolve the debt and levy.
Remember, you have rights and options, especially if you are facing financial hardship or the IRS made mistakes when assessing your taxes.
Action Steps:
- Schedule a free call with Wiztax:
- Whether your tax debt qualifies for discharge
- Which chapter of bankruptcy (Chapter 7 or 13) applies
- Understand that filing triggers an automatic stay under 11 U.S.C. § 362, halting levies and other collection actions.
Need help with any of these options? Want to know more about settling your tax debt for less than it is owed? You can start online by answering 6 simple questions.6 Simple Questions. Free Evaluation.