Getting a Levy Released for Economic Hardship

A levy is the IRS taking your money: a bank account frozen, a paycheck garnished, a Social Security payment reduced. For people already living on the edge, a levy can mean an eviction notice or a shutoff notice within days. The Internal Revenue Code has a specific provision for that situation, and it is mandatory, not discretionary.

The statute

IRC 6343(a)(1) says the IRS "shall release the levy upon all, or part of, the property or rights to property levied upon" if any of several conditions exists. One of them, in subparagraph (D), is that "the Secretary has determined that such levy is creating an economic hardship due to the financial condition of the taxpayer."

A second provision speaks to wages. IRC 6343(e): "In the case of a levy on the salary or wages payable to or received by the taxpayer, upon agreement with the taxpayer that the tax is not collectible, the Secretary shall release such levy as soon as practicable."

Both say "shall." Once the IRS determines the levy is causing economic hardship, release is required.

The regulation

Treasury Regulation 301.6343-1(b)(4) supplies the test: the levy creates an economic hardship "if satisfaction of the levy in whole or in part will cause an individual taxpayer to be unable to pay his or her reasonable basic living expenses." The regulation lists the factors the IRS must consider, including age, employment, dependents, the cost of necessities, local cost of living, exempt property, and extraordinary circumstances such as a medical catastrophe or natural disaster. I walk through those in how the IRS defines economic hardship.

The regulation also requires good faith. Falsifying information, inflating expenses, or "failing to make full disclosure of assets" are examples of bad faith that defeat a hardship release.

Individuals only

The hardship release condition is about an "individual taxpayer." The Tax Court noted in Vinatieri, discussed below, that the mandatory release of a levy creating economic hardship applies only to individuals. A corporation's cash flow problems are handled under other rules.

How to ask

Regulation 301.6343-1(c) describes the request. A taxpayer "must submit a request for release in writing or by telephone." The request should include:

• The taxpayer's name, address, and taxpayer identification number.
• A description of the property levied upon.
• The type of tax and the period for which the tax is due.
• The date of the levy and the originating office, if known.
• A statement of the grounds for release.

In practice, the grounds for a hardship release are proved with financial information. IRM 5.19.13.3 says that if a taxpayer states they are experiencing an economic hardship due to a levy, the employee should "secure enough financial information to confirm the levy is causing the taxpayer to be unable to meet necessary living expenses," and that this applies "even in situations where the taxpayer has unfiled returns."

Timing for seized property

For levies on property that will be sold, the regulation sets deadlines. Except in extraordinary circumstances, the request "must be made more than five days prior to a scheduled sale." If made 30 or more days before the sale, the determination is generally made within 30 days. If made less than 30 but more than 5 days before, the determination must be made before the sale, and the IRS may postpone the sale to make it.

What release looks like

Release can be full or partial. The campus procedures in IRM 5.19.17.2.4 give examples:

• A taxpayer whose financial statement shows all allowable living expenses can be paid but nothing is left for the IRS: "We must release all levies."
• A taxpayer whose only income is Social Security, deposited into a levied account, who shows an eviction notice for the amount levied: the levy is released.
• A wage earner who cannot cover necessary expenses with the exempt amount of the paycheck, but whose financial statement shows $400 a month of ability to pay: a partial release, leaving $400 a month subject to levy.
• A taxpayer with a documented, one-time emergency preventing basic necessities: a partial release.

IRM 5.19.17.2.4 also states that "All outstanding levies on salary or wages must be released when a case is closed under hardship provisions," and the field IRM, 5.16.1.2.9, requires steps to accomplish the wage levy release "immediately," with case histories reviewed to make sure wage levies are released before an account is declared uncollectible under hardship codes.

Vinatieri v. Commissioner

The leading case is Vinatieri v. Commissioner, 133 T.C. 392 (2009). The taxpayer had pulmonary fibrosis, worked part time, and reported monthly income of about $800 and expenses of about $800 on Form 433-A. The settlement officer in her Collection Due Process hearing noted that she met the criteria for hardship CNC. But because she had not filed two returns, Appeals sustained a levy on the ground that collection alternatives could not be considered for a taxpayer out of filing compliance.

The Tax Court rejected that. It observed that "Neither section 6343 nor the regulations condition a release of a levy that is creating an economic hardship on the taxpayer's compliance with filing and payment requirements." Proceeding with a levy that section 6343 "would require its immediate release" was unreasonable, and the determination was "wrong as a matter of law" and an abuse of discretion.

The IRS's own campus procedures now cite the case. IRM 5.19.17.2.4.1 notes there is "no requirement that taxpayers who are closed under the exception criteria and experiencing economic hardship be in filing or payment compliance before a levy is released," citing Vinatieri.

Two cautions about the case. First, it involved a pre-levy CDP hearing and a summary judgment motion; the court denied the IRS motion rather than resolving every issue. Second, the opinion recognizes that requiring filing compliance for collection alternatives is generally reasonable when the taxpayer has income to meet basic expenses. Vinatieri protects people in genuine hardship. It is not a reason to stop filing.

Exempt amounts are not the same as hardship

Some income is partly exempt from levy by statute. Wages, for example, have an exempt amount under IRC 6334(d), and the inflation-adjusted figure used in that computation for 2026 is $5,300 under Rev. Proc. 2025-32. That exemption is a floor the IRS must respect on every wage levy. Hardship release is a separate, broader protection: it applies when what is left after the exempt amount still does not cover your reasonable basic living expenses. Do not assume the exemption is all the protection you get.

A levy can come back

IRC 6343(a)(3) says release of a levy "shall not prevent any subsequent levy on such property." If your circumstances improve, or if new facts show equity or income, a new levy is possible. That is one reason to move from a levy release to a durable resolution, whether that is CNC, an installment agreement, or an offer.

Practical steps when a levy hits

1. Call the number on the levy notice or the number for the unit that issued it, the same day if possible. Say the words "economic hardship" and explain what the levy is preventing you from paying.
2. Have proof ready: the eviction notice, the shutoff notice, the pay stub, the bank statement, the medical bill.
3. Be prepared to give financial information over the phone or on Form 433-F, and follow up quickly with documentation.
4. For a bank levy, act fast. Under IRC 6332(c), a bank generally holds levied funds for 21 days before sending them to the IRS, which gives you a window to get the levy released.
5. If the IRS employee disagrees about hardship, ask for a manager and consider the Taxpayer Advocate Service, which IRM 5.15.1.2 identifies as the referral when the IRS and taxpayer disagree about economic hardship.

The law is on the side of people who cannot afford basic living expenses. Use it quickly, and with proof.