How to Stop or Release an IRS Social Security Levy

A Social Security levy is not permanent. The IRS turns it off every day for people who do the right things in the right order. The law tells you exactly what those things are.

The governing rule is Internal Revenue Code section 6343(a). It does not say the IRS may release a levy. It says the IRS shall release it when certain conditions exist. The regulation that implements it, Treas. Reg. 301.6343-1, spells out each condition.

The five conditions that require release

Under 6343(a)(1) and Treas. Reg. 301.6343-1(b), the IRS must release a levy if:

1. The liability is satisfied, or the collection statute under IRC 6502 has expired.
2. Release will facilitate collection.
3. You have entered into an installment agreement under section 6159, unless the agreement provides otherwise.
4. The levy is creating an economic hardship because of your financial condition.
5. The value of the property exceeds the liability and part of it can be released without hurting collection.

For retirees on Social Security, numbers 3 and 4 do almost all the work.

Route one: economic hardship

Treas. Reg. 301.6343-1(b)(4) defines economic hardship as a levy that leaves you unable to pay your reasonable basic living expenses. It then lists the factors the IRS must consider, and they read like they were written with retirees in mind:

• Your age, employment status, and ability to earn.
• Food, clothing, housing, utilities, homeowner insurance and dues.
• Medical expenses, including health insurance.
• Transportation and current tax payments.
• The cost of living where you live.
• Extraordinary circumstances such as a medical catastrophe or natural disaster.

A 74-year-old in Pinellas Park with no earning capacity, rising Medicare costs, and a fixed benefit has a very different hardship profile than a 45-year-old with a job. The regulation requires the IRS to see that difference.

There is a good faith requirement. Falsifying information, inflating expenses, or hiding assets kills the request. Be precise and document everything.

What you submit: a financial statement, usually Form 433-F or Form 433-A, with bank statements, your SSA-1099 or benefit letter, pension statements, rent or mortgage statements, utility bills, insurance premiums, and pharmacy costs. The IRS compares your expenses to its Collection Financial Standards. Health care costs often exceed the standard for older taxpayers, and you are allowed more if you can document it. See Medicare premiums and medical costs on IRS financial forms.

A hardship determination usually comes with a currently not collectible closure, which is one of the codes that excludes your account from the Federal Payment Levy Program. Details are in living on Social Security alone and owing the IRS.

Route two: an installment agreement

If you can afford something each month, a payment plan is usually the fastest path. Section 6343(a)(1)(C) requires release once the agreement is in place. Section 6331(k)(2) separately bars new levies while your request is pending, for 30 days after a rejection, during any appeal of the rejection, and while the agreement is in effect.

For balances of $50,000 or less, the IRS generally grants streamlined agreements without a full financial statement. Larger balances require one. Either way, pick a payment you can actually make every month. A defaulted agreement puts you right back in the levy program.

One practical point: paying the IRS a voluntary monthly amount is usually better for you than having 15 percent taken involuntarily, because you control the amount and the date, and the levy stops.

Route three: an offer in compromise

Once the IRS accepts an offer for processing, section 6331(k)(1) bars levy while it is pending and for 30 days after a rejection, plus any appeal. Treas. Reg. 301.7122-1(g) says the same thing. A pending offer is an FPLP exclusion.

Do not file an offer just to stop a levy. If the IRS decides an offer was submitted solely to delay collection, it can return it and resume levy. Offers make sense when your reasonable collection potential is genuinely less than what you owe. See offers in compromise for retirees on fixed income.

Route four: appeal rights

• Collection Due Process hearing. If you are still inside the 30-day window from your CDP notice, a timely Form 12153 suspends levy action under IRC 6330(e) while the hearing is pending.
• Equivalent hearing. Within one year of the CDP notice date, under Treas. Reg. 301.6330-1(i). Same issues, but no automatic suspension of collection and no Tax Court review.
• Collection Appeals Program. Talk to the collection manager first, then file Form 9423. Fast, but final.

Route five: the Taxpayer Advocate

If the levy is causing immediate harm, such as an eviction notice or a utility shutoff, and the IRS is not moving, the Taxpayer Advocate Service can step in. You request help with Form 911. TAS is an independent office inside the IRS. It is not a substitute for doing the work above, but it is a real lever when the normal channels stall.

The timing trap

Here is the part most people miss. An FPLP levy is released by posting a code to your IRS account, which then generates a reversal that has to reach the Bureau of the Fiscal Service before its processing cutoff. IRM 5.11.7 walks through examples where a taxpayer got an installment agreement or hardship approved, and the next payment was still levied because the reversal posted after the cutoff.

When an imminent payment is at risk, IRM 5.11.7 lets the IRS ask its FPLP coordinator to rescind the levy on that payment, using Form 4844. If your next Social Security date is close, ask the IRS employee whether a rescind request is needed.

Mistakes that keep levies running

I see the same handful of errors over and over. The first is calling only once. A retiree explains the situation to an IRS assistor, hears "we will note the account," and assumes the levy is handled. Notes are not releases. Ask what code is being posted, when, and whether the next payment is protected.

The second is sending a financial statement with gaps. A Form 433-F missing bank statements or showing expenses with no proof gets sent back, and every week it sits is another levied payment. Send it complete the first time.

The third is agreeing to a payment plan you cannot keep. If Social Security is your main income and you promise $400 a month to stop a $330 levy, you will default within a few months and the levy comes back. Hardship status exists for exactly this situation. Use it if it fits.

The fourth is ignoring new tax years. Any new balance, such as an unpaid tax bill from an IRA withdrawal, can default an installment agreement or reopen a hardship closure. Fix withholding so next year does not undo this year's work.

Getting the money back

A release stops future levies. It does not automatically refund what was already taken. IRM 5.11.7 notes that when a levy is released for hardship or because you entered an installment agreement, levied payments may be returned, subject to the time limits in section 6343, and that returning them is generally in the government's interest. Ask for the return in writing as part of your release request.

Next step

Figure out which route fits your numbers, gather the documents, and make the request before your next payment date. If you want a lawyer to handle the call and the paperwork, call (813) 229-7100. The firm's page on currently not collectible status explains the hardship route in more depth.