IRS Bank Levy – What it is, How it Works & What to Do
An IRS bank levy is the legal seizure of a taxpayers bank account funds in order to satisfy back taxes. The IRS can seize funds from just about any account you may hold at a bank, most common types of accounts the IRS goes after are checking and savings accounts.
When the IRS uses a Bank Levy
The IRS will use a bank levy as a last resort collection mechanism for unpaid IRS taxes. If you receive this form of levy you have probably received many assessments for taxes owed and many demands for payment of that tax debt. The IRS does not like to garnish peoples bank accounts but will do it if a taxpayer is unresponsive and does not take action to clean up their tax situation.
How it Works
The IRS will send you a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” in the mail or give to you in person. This notice will tell you that you have 30 days to pay your taxes or request a hearing and if not the IRS will begin to levy your assets. This is the final notice you will receive before the IRS takes action. You will not know what form of levy the IRS will use following this notice but an IRS bank levy is one of the more common forms. If the IRS does decide to use a bank levy they will contact your bank after the 30 days are up (and no action was taken on the taxpayers end) and if there are sufficient funds in your accounts the IRS will require the bank to immediately freeze the account. Once the account is frozen the bank will be required to hold the money for 21 days before sending over to the IRS. The IRS can only take the funds that were in the account at the point in time they issued the levy to the bank, any deposits after that are not subject to the levy.
What to Do
An IRS bank levy is a serious situation and it is important to take quick action if you can’t afford to have the IRS seize the funds from your bank account. In order to stop the levy you must do one of two things. First you can settle your taxes with the IRS. In order to settle your taxes with the IRS you must either pay the taxes in full, set up some other arrangement to pay them back, or come to an agreement on some other form of payment. There are many various ways to settle your taxes, to find the best method for your situation it is highly suggested that you talk with a tax professional and have them handle the settlement on your behalf. Second you can get declared uncollectible. In order to do this you must prove to the IRS that if they were to levy your bank account then it would cause you financial hardship.
Dealing with the IRS in a situation like this is not easy. The IRS will most likely not be very accommodating to the taxpayer because of how late it is in the collection process and they have already labeled you as an unresponsive taxpayer. If you are in this situation, consider getting assistance from a tax professional to help with your situation.
Find more IRS Bank Levy information. We provide bank levy help to taxpayers that are having trouble facing the IRS. Read more about our services.
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