Can You Get the IRS To Release A Levy if I Have Unfiled Returns
I was recently contacted by someone who just received notice from their employer that their wages were going to begin being garnished by the IRS. Basically, we were on a deadline of the next payday (about 5 days away) to get the levy released before payroll was sent off so the client didn’t see any change in her paycheck.
When we spoke about the case, I thought we were clear that all returns had been filed, but the client just owed the IRS money for a few years. Upon calling the IRS to negotiate the release of the levy, I was informed that there were, in fact, outstanding tax returns that must be filed.
Before the IRS will negotiate with you whether it is to negotiate the release of a wage garnishment or to ask them to accept an offer in compromise, you must have at least the last six years tax returns filed. If you do not, the IRS will not begin to negotiate with you.
I always urge my clients to go ahead and file their tax returns on time every year whether they can afford to pay the tax or not. Why? For two main reasons. First, by filing you immediately avoid the failure to file penalty that the IRS assesses. This can add up quickly. The failure to file penalty is 5% of the tax owed per month up to a maximum of 25%. Yuck!
Second, by filing, you begin the statute of limitations clock running for how long the IRS to collect the tax that you owe. If you never file the clock never starts and you are stuck with the IRS for the rest of your life or until you finally pay off the tax, penalties and interest.
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