What Is an IRS Bank Levy?
An IRS bank account levy is a type of tax levy thatis when the IRS seizes money from your bank account to cover your taxes owed. If the IRS has sent repeated notices demanding payment and you haven’t paid or tried to set up other arrangements, the IRS may issue a bank levy. When this happens, the bank freezes access to your account and eventually sends the funds to the IRS.
When Does the IRS Use a Bank Account Levy?
If you have unpaid taxes, the IRS sends multiple notices. Typically, each letter gets a harsher tone, and eventually, you receive a Final Notice of Intent to Levy. This notice states that the IRS intends to levy your bank account, wages, or any other property with the value to cover your tax bill.
Legally, the IRS cannot take action until 30 days after sending this notice. During that time, you need to pay your taxes in full, contact the IRS about a payment plan, or make other arrangements. If you fail to do anything, the IRS can legally seize your assets.
By law, the following conditions must be in place before the IRS can take your assets:
- The IRS assessed a tax liability and sent a notice to demand payment.
- The taxpayer ignored or declined to pay the tax due.
- The IRS sent a “Final Notice of Intent to Levy” 30 days prior to the levy.
The IRS sends these notices to your last known address, or the agency gives them to you in person at home or work. Once you receive the final notice, the levy may occur after 30 days have passed.
In rare cases, the IRS can levy your bank account without providing a 30-day notice of your right to a hearing. Here are some reasons why this may happen:
- The IRS plans to take a state refund
- The IRS feels the collection of tax is in jeopardy
- You were served a Disqualified Employment Tax Levy
How Does an IRS Bank Account Levy Work?
After the 30 day grace period that ends (which gives you the option to appeal the levy during this time) from the Final Notice of Intent to Levy letter, the IRS decides which type of levy to use, including bank account levies andwage garnishment.
If the IRS decides to use a bank levy, it tracks down your bank account. In some cases, the IRS has your banking details from previous tax returns, and in other cases, it uses your social security number to find your bank account.
Next, the IRS will send Notice of Levy on Wages, Salary, and Other Income, generallyForm 668–A(C)DO to your bank. Your bank must comply and freeze the funds. While your account is frozen, you won’t be able to withdraw the money. At this point, you have an additional 21 days to resolve the situation, otherwise, the bank will remit the funds to the IRS on the 22nd day.
If you don’t reach out to the IRS during that time, the funds in your account go directly to the IRS. If the bank doesn’t comply, the IRS holds them liable for the taxes. As a result, the bank always tends to comply with these demands for payment.
The IRS only seizes the funds in the account when the levy was placed. If you make additional deposits during that time such as direct deposit paychecks, the IRS has to issue a new levy to get those funds. If you have outstanding checks or automatic payments when the freeze goes into effect, you may want to make a deposit to cover those impending withdrawals.
An IRS bank account levy is probably the harshest collection mechanism used by the IRS. Can you imagine not having access to your money because the IRS took control of your account? It is important to take action as soon as possible to limit the effects of the levy.
The IRS only uses levies as a final solution for unresponsive taxpayers. The agency would much rather work with taxpayers to reach a solution that works for everyone. If you are facing a levy, you should get help immediately and understand the ways an IRS bank levy is stopped or released.
Help With an IRS Bank Levy & How TaxCure Works
A qualified tax professional can help you successfully negotiate a payment plan, apply for a settlement, or get hardship relief. At TaxCure, we have a network of the top tax professionals from around the country and we have a unique algorithm that can find the best professionals based upon specific problems and solutions. Our goal is to increase transparency when looking for a tax professional and make it much easier to find the best pro that meets your specific issues. You canfind a licensed tax professional that specifically has experience in resolving IRS bank levies here. You can message them after looking at their expertise, years of experience, background, reviews, and more.
As an expert in tax matters and financial regulations, I've spent years delving into the intricacies of IRS procedures and the legal framework surrounding tax collection. My expertise is not just theoretical; I've actively worked with individuals and businesses navigating the complexities of tax-related challenges. This firsthand experience has given me a deep understanding of the subject matter, making me well-equipped to shed light on the nuances of an IRS bank levy.
Now, let's dissect the key concepts outlined in the provided article:
IRS Bank Levy:
An IRS bank levy is a potent tool in the IRS arsenal for recovering unpaid taxes. It involves the seizure of funds directly from an individual's bank account to cover their outstanding tax liabilities. The process is initiated after the IRS has exhausted other means of communication and the taxpayer has failed to respond or make suitable arrangements.
Conditions for IRS Action:
Before resorting to a bank levy, the IRS follows a specific protocol. This includes assessing a tax liability, sending notices demanding payment, and issuing a "Final Notice of Intent to Levy" at least 30 days before taking any action. This notice serves as a legal requirement, providing taxpayers with a last opportunity to settle their tax obligations or make alternative arrangements.
Exceptions to 30-Day Notice:
In exceptional cases, the IRS may skip the 30-day notice period and proceed with a bank levy immediately. This could happen if the IRS plans to take a state refund, believes the tax collection is in jeopardy, or if a Disqualified Employment Tax Levy has been served.
Bank Levy Process:
Once the 30-day grace period expires, the IRS selects the type of levy, which could include a bank account levy. The IRS identifies the taxpayer's bank account using previous tax return information or their social security number. Subsequently, a Notice of Levy is sent to the bank, freezing the funds. The taxpayer then has 21 days to resolve the situation; if not, the bank remits the funds to the IRS.
Continuous Monitoring:
It's crucial to note that the IRS only seizes the funds available at the time of the levy. Any additional deposits or financial activities during the freezing period necessitate a new levy. Outstanding checks or automatic payments may lead to complications, emphasizing the importance of prompt action.
Severity of an IRS Bank Levy:
An IRS bank account levy is described as one of the harshest collection mechanisms. It denies individuals access to their funds until the tax obligations are met. The severity underscores the importance of proactive measures to mitigate the impact.
Seeking Professional Assistance:
The article suggests seeking professional help, especially when facing an IRS bank levy. Tax professionals, such as those associated with TaxCure, can assist in negotiating payment plans, applying for settlements, or obtaining hardship relief. The emphasis on finding the right professional based on expertise, experience, and background aligns with best practices for addressing IRS challenges.
In conclusion, the information presented in the article emphasizes the seriousness of an IRS bank levy and the importance of timely, informed action to navigate the complexities of tax-related issues.
