Understanding Bank Levies
The Internal Revenue Service (IRS) possesses the authority to impose a bank levy, a legal tool employed to seize funds from a taxpayer’s bank account in order to settle outstanding tax obligations. This action is typically taken when a taxpayer fails to remit payment after receiving multiple notifications and inquiries from the IRS.
Conditions Preceding a Bank Levy
Before the IRS can proceed with a bank levy, specific legal requirements must be met:
- The IRS must have assessed the taxpayer’s tax liability and issued a formal demand for payment.
- The taxpayer must have neglected or refused to settle the tax debt.
- The IRS must have provided the taxpayer with a “Final Notice of Intent to Levy” at least 30 days prior to the levy.
Procedure for Imposing a Bank Levy
Following the expiration of the 30-day grace period, the IRS selects a levy method, which may include bank levies or wage garnishments. The IRS then locates the taxpayer’s bank account, either through existing tax return information or by utilizing the taxpayer’s social security number.
The IRS subsequently notifies the bank of its intent to levy the account, prompting the bank to freeze the funds. The taxpayer has 21 days from the date of the levy to contact the IRS and resolve the situation. If no action is taken within this timeframe, the bank releases the frozen funds to the IRS on the 22nd day.
Exemptions and Protections
The IRS typically employs bank levies as a last resort measure. However, certain assets are exempt from seizure, including:
- Social Security benefits
- Supplemental Security Income (SSI)
- Unemployment benefits
- Workers’ compensation benefits
- Certain retirement accounts
Remedies for Taxpayers
Taxpayers facing a bank levy have several options:
- Payment in Full: Settling the tax debt in its entirety will promptly release the levy.
- Payment Plan: Taxpayers may arrange an installment agreement with the IRS to gradually repay the debt.
- Offer in Compromise: In certain circumstances, taxpayers may negotiate a reduced settlement amount with the IRS.
- Request for Release of Levy: Taxpayers may request the IRS to release the levy if they can demonstrate financial hardship or other compelling reasons.
Consequences of Ignoring a Bank Levy
Failure to address a bank levy can result in severe consequences, including:
- Loss of funds from the levied bank account
- Damage to credit score
- Potential legal action by the IRS
Seeking Professional Assistance
Navigating the complexities of IRS bank levies can be challenging. Taxpayers are strongly advised to seek guidance from a qualified tax professional or attorney who can provide personalized advice and assist in resolving the situation effectively.
Can the IRS Take Money Out of Your Bank Account? IRS Bank Levies Explained!
FAQ
At what point will IRS levy your bank account?
How do I stop an IRS levy on my bank account?
Why did my bank account get levied?
Why would the IRS take money from my bank account?
Can the IRS levy a bank account?
If a taxpayer has neglected or willfully failed to pay a tax debt, the IRS may decide that a bank account levy is the right action. It must be preceded by certain notices, including a Final Notice of Intent to Levy. The IRS may only levy up to the amount owed in tax liability. How Often Can the IRS Put a Levy on Your Bank Account Each Month?
How does a bank levy affect my bank account?
In the case of a bank levy, funds in the account are frozen as of the date and time the levy is received. Normally, the levy does not affect funds you add to your bank account after the date of the levy. I was included as signature on the bank account of my elderly mother to help her pay her bills. The IRS has levied the account for my tax debt.
What can I do if the IRS levy my bank account?
The following options are available to you after the IRS levies your bank account: You can stop the levy before your money goes to the IRS by requesting a payment extension that lets you pay off the debt within 120 days. You can negotiate a payment plan or apply for the currently non-collectible status.
Can I access my bank account after a tax levy is issued?
You won’t be able to access the funds you had in a bank account after the levy is issued. The bank will freeze the funds for three weeks to give the IRS time to determine the ownership of the account.