Can You Settle an IRS Levy with an Offer in Compromise?
Under Levy? An Offer in Compromise Could Be Your Path to Relief
If the IRS is actively levying your wages, bank accounts, or even placing an IRS levy on Social Security benefits, you may feel powerless—but there’s a legal way to settle your tax debt for less and stop future levies.
It's called an Offer in Compromise (OIC)—and if you qualify, it could resolve your IRS problem permanently.
In this post, we explain how the Offer in Compromise works in relation to levies, when it stops IRS wage garnishment enforcement, and what steps you need to take to use it as a solution.
Can You File an Offer in Compromise While Under IRS Levy?
Yes—but with important caveats.
If you are currently being levied (wages, bank account, etc.), you can still submit an OIC to settle your tax debt.
However:
- The levy
may not be immediately released just because you submitted an offer
- You must include
Form 656 and Form 433-A(OIC) or 433-B(OIC)
- The IRS
usually suspends collection action while your offer is under review
Related: how to qualify for an Offer in Compromise
Does Submitting an OIC Stop the Levy Automatically?
No.
Filing an Offer in Compromise does not trigger an automatic levy release. However, IRS policy generally suspends enforcement activity once:
- The offer is deemed
processable
- All required documents and fees are submitted
- You are in full
filing compliance
Until then, active levies—especially wage garnishments—may continue.
When Will the IRS Stop the Levy?
The IRS typically stops levy enforcement:
- Once the offer is
received and accepted for processing
- After a Revenue Officer is assigned and reviews your financials
- If your CPA or representative
requests a temporary hold based on hardship
A formal levy release can be requested separately using:
- IRS Form 911 (for Taxpayer Advocate intervention)
- A hardship statement using Form 433-A
- A direct contact with the assigned Revenue Officer
Related:
IRS Collection Appeals Program (CAP) vs CDP Hearings – What’s the Difference?
Will the IRS Accept My Offer?
The IRS will evaluate your offer based on Reasonable Collection Potential (RCP)—your:
- Assets
- Monthly income
- Necessary living expenses
- Future earning potential
If your offer reflects what the IRS could realistically collect, and you’re otherwise compliant, your OIC has a good chance.
What If the IRS Rejects My OIC?
If rejected:
- The IRS
may resume levy activity, especially if no other resolution is in place
- You can
appeal within 30 days using Form 13711
- You can
submit a revised offer if your situation changes
This is why many taxpayers search for why the IRS rejected your Offer in Compromise—it’s a common setback that can be challenged with the right strategy.
California residents may also explore the California FTB Offer in Compromise program, which provides similar relief at the state level.
How to Use an OIC to Stop an IRS Levy
Step 1: Get into Compliance
All required tax returns must be filed before the IRS will process your offer.
Step 2: Complete OIC Forms
- Form 656 (the offer)
- Form 433-A(OIC) or 433-B(OIC) (financials)
Step 3: Submit with Payment
Include:
- $205 application fee
- Initial offer payment (unless qualifying for low-income exemption)
Step 4: Request Levy Suspension
Ask the IRS to pause enforcement during OIC review—especially for active wage levies or bank account freezes.
We Help Orange County Taxpayers Stop Levies with an OIC
At Boulanger CPA and Consulting PC, we:
- Stop IRS levies quickly
- Prepare and file your Offer in Compromise
- Negotiate directly with Revenue Officers
- Settle your IRS debt for a fraction of what’s owed
For more strategies to protect yourself and your assets, you can explore more in Defend What’s Yours.
📞 Call
(657) 218-5700 or request your OIC evaluation at
www.orangecounty.cpa
Frequently Asked Questions
Can an Offer in Compromise stop an IRS levy?
Yes. Filing an Offer in Compromise generally suspends IRS collection activity, including levies, while your offer is being reviewed.
Does the IRS automatically release levies once I file an OIC?
Not always. The IRS may keep existing levies in place until your OIC is deemed processable. Once accepted for review, new levies are usually halted.
Can I settle for less than the levy amount?
Yes. If your OIC is accepted, you may settle your total tax liability for less than the balance owed, which eliminates the need for ongoing levies.
What happens if my OIC is rejected?
You can appeal the rejection within 30 days or explore alternatives such as installment agreements, CNC status, or penalty abatement.
How long does it take to stop levies through an OIC?
The IRS typically suspends new levies soon after an OIC is accepted for processing, but the full review process may take 6–12 months.
Can I use an OIC to settle both IRS and California levies?
No. The IRS OIC only applies to federal taxes. California’s FTB has a separate Offer in Compromise program for state tax debt.
Should I hire a CPA for levy and OIC cases?
Yes. Professional representation ensures your offer is complete, your rights are protected, and levies are stopped as quickly as possible.
📣 About the Author
Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.
He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.
With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.
Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.
Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.
📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.
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