Legal Guide posted originally to Avvo.com https://www.avvo.com/legal-guides/ugc/how-to-unfreeze-a-bank-account-that-the-irs-has-frozen
Research has proven that 89% of people fail to remit or respond to collection demands because they are unaware of various accounting and tax regulations. While this could be an innocent mistake for some people, it could attract the attention of the IRS, resulting in a bank account freeze.
The IRS could freeze your account for various reasons, from suspicious activity and bank secrecy violations to failure to remit taxes. Recovering your account could be a nightmare, particularly if you do not understand the law.
While unfreezing your account could seem straightforward, various steps go into it. You might also need a professional to facilitate this process. The following are in-depth insights into unfreezing such bank accounts and how to avoid the freezes.
What to Do If the IRS Freezes Your Bank Account
The IRS freezes your bank account for 21 days after unearthing violations and submitting notice. Your bank is expected to submit funds by the end of the 22nd day. For this reason, you must act within 21 days. Here are a few things to consider during this time.
Respond to the IRS
The IRS allows you to respond to the issues, preferably before they freeze the bank account. It sends a warning called a Notice of Intent to Levy, giving you 30 days to act and prevent the freeze. Responding to the IRS within the first 30 days is recommended, as it helps avert the freeze.
You’ll contact the IRS for two reasons. First, you need to understand the need for the bank account freeze, whether it is a secrecy violation, an accumulated tax debt, or suspicious activity. An elaborate statement allows you to take the necessary remedial measures.
Reaching out to the IRS will also give you insights into how to remedy the situation. The IRS will provide a detailed outlook of your case, indicating what measures you must take to avoid or eliminate the bank account freeze.
Hire an Expert
An excellent tax lawyer will help maneuver this problem, adequately addressing it to avoid further charges. This attorney will also highlight your rights and the necessary steps you must take. Often, you’ll rely on them to break down all the complex tax laws and regulations, including how much the IRS can take from your account at the expiry of the notice.
However, the lawyer you choose matters.
It would be best to consider an experienced and specialized attorney for the best results. With experience, an attorney shall help formulate a payment plan, lower the tax liability, or eliminate the problem.
How to Unfreeze an IRS-Frozen Bank Account
Everyone looks forward to seamless transactions, whether in business or for family use. Unfreezing your bank account is the first step towards this goal. There is no one-dimensional approach to unfreezing an IRS-frozen bank account. However, the following options suffice.
Clear Your Taxes
The IRS freezes your bank account over tax arrears. It would be best to clear them fully. This move cushions you against further charges, penalties, and levies.
Ask for An Installment Agreement
The tax arrears could be too huge to handle all at once. You could apply for an installment agreement to pay monthly installments. This payment plan uses a check-off system that guarantees convenience and flexibility. However, you must request an amount you can comfortably pay off monthly.
Offer In Compromise
An offer in compromise is an arrangement that allows you to settle your tax debt for less than the owed amount. This program is offered to individuals who cannot fully repay their debt. Often, the arrangement requires you to pay a particular percentage or amount, depending on the agreement.
Let a Tax Professional Help
An excellent tax professional could help negotiate with the IRS, significantly reducing or eliminating the payable amount. This expert leverages various loopholes in the law to ensure you get a fantastic deal.
Consequences of Not Unfreezing Your Account
What happens when you do not unfreeze your account? First, the IRS does not freeze your bank account. Instead, this freeze applies to the amount on your bank account at the time of the levy. This means any cash deposited after the freeze is accessible. However, the initial amount on the bank account will be turned over to the IRS on the 22nd day if you do not take action.
Suppose you do not unfreeze your account. Then, the amount turned over to the IRS will go into repaying your debt, charged interests, and penalties.
If this amount can fully cover the debt, the IRs will use only what it requires and return the remaining to your account. However, if the amount is insufficient, the IRS could go after your wages, properties, or any other source of income.
How to Prevent Your Bank Account From Being Frozen In the Future
A frozen bank account—a nightmare you’d never wish for! Taking preventive measures will cushion you against various inconveniences. You must take the following steps to protect yourself from these freezes.
Be Proactive
Pay your taxes on time! A tax expert will help you file your returns on time and correctly, avoiding any unwanted IRS intrusion in the future. At the same time, do not default on your OIC, as it could force the IRS to terminate the agreement and freeze the accounts once more.
Avoid Suspicious Activities
Your bank account will likely be frozen if you violate bank secrecy codes or engage in suspicious activities. Avoiding anything that could raise such suspicion will protect you against freezes in the future.
Unfreeze Your Account Today
While you could take all the precautions above, a bank account freeze could be inevitable in some instances. There can never be a better time to reach out to us at Cumberland Law Group, LLC than this! We offer comprehensive tax law services, including guiding you through an IRS bank account freeze! Call us today for a free consultation!
The article you've provided from Avvo.com discusses a critical issue many individuals face: dealing with an IRS-frozen bank account. This is a complex situation that requires a nuanced understanding of tax regulations, legal procedures, and negotiation tactics. Here's an in-depth breakdown of the concepts and steps outlined in the article:
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Reasons for an IRS Freeze: The IRS can freeze a bank account for various reasons, including suspicious activity, violating bank secrecy laws, or failing to pay taxes.
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Response Timeline: Upon discovering violations, the IRS freezes the account for 21 days, giving notice and expecting the bank to submit funds by the 22nd day.
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Response Procedures:
- Contact the IRS: Responding within the first 30 days upon receiving a Notice of Intent to Levy is crucial. Understanding the reasons behind the freeze and seeking guidance on remedial actions from the IRS is advised.
- Hiring a Tax Lawyer: An experienced tax lawyer helps navigate the complexities, educates on rights, and formulates strategies to address tax liabilities.
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Unfreezing Methods:
- Clearing Tax Debts: Fully paying off tax arrears prevents further penalties.
- Installment Agreements: Requesting a payment plan for manageable monthly installments.
- Offer in Compromise: Negotiating to settle tax debts for an amount less than owed.
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Consequences of Not Unfreezing:
- Failure to act results in the initial frozen amount being handed over to the IRS, potentially covering debts, penalties, and interests.
- Remaining debt might lead to IRS pursuit of wages or properties.
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Preventive Measures:
- Timely Tax Payments: Avoiding defaulting on tax payments and maintaining compliance.
- Avoiding Suspicious Activities: Steer clear of actions that could raise suspicion.
The guidance emphasizes the importance of professional assistance, timely responses, and compliance with tax obligations to prevent and address account freezes effectively.
Given this comprehensive breakdown, handling an IRS-frozen account demands a thorough understanding of tax laws and procedural intricacies. Seeking professional guidance, such as that offered by the Cumberland Law Group, LLC, becomes invaluable in navigating such challenging situations.
