IRS Bank Levy

A bank levy is a legal seizure of your property to satisfy your tax debt. It is not something that has happened by surprise – although, it is a surprise to find out that it has happened. A bank levy has come as a result of ignored communication from the IRS, or state taxation agency, to the delinquent taxpayer. Time is of the essence. Once the levy has been successfully completed, after a pause of 21 days from the date of the filing of the Notice with the bank, the contents of the account needed to satisfy the tax debt will be sent to the to the IRS or state tax agency. After it leaves the bank, it is extremely difficult to get it returned.

The IRS Levy is a hold on your money, up to the amount of the back taxes and they can levy your bank account(s), and other financial holdings, up to the amount of the back taxes that are due. The Internal Revenue Code (IRC)6331 authorizes levies to collect delinquent tax. Under the code, any property or right to property that belongs to the taxpayer, or on which there is a Federal Tax Lien, can be levied – unless the IRC exempts the property from levy.

The IRS usually requires that four (4) requirements be met prior to the issuing of a levy. First, the IRS has assessed the tax and sent you Notice and Demand for Payment of the assessed tax. That is the issuance of the taxpayer’s tax bill. The second requirement is the responsibility of the taxpayer – and the taxpayer has neglected to acknowledge the Notice, has neglected to acknowledge the Demand for Payment, and has refused to pay the tax bill. The third requiremen tcomes when the IRS sends the taxpayer a Final Notice of Intent to Levy and a Notice of Your Right to Hearing (levy notice) at least thirty (30) days prior to the placing of the levy. An agent of the IRS may give you this Notice in person, leave it at your home or place of business, or send it to your last known address by certified or registered mail with return receipt requested. If you live in a state where taxes are paid, the IRS may levy your state tax refund. In the case of state tax refunds, the IRS may send you their Notice of Levy on Your State Tax Refund and Notice of Your Right to Hearing after the levy is already in place. The fourth requirement comes when the IRS sends the taxpayer advance Notification of Third-Party Contact. This notification states that the IRS may contact third-parties regarding the determination or collection of your tax liability.

If you do not pay your taxes and make no effort to respond to your IRS tax bill and settle your debt, the IRS can make the determination that is the next appropriate step in the process. The IRS may have already placed a lien on any property, or interest in property, that the delinquent taxpayer may have. At this point, the IRS may levy any property you own or have an interest in. The IRS can levy real and personal property that may be held by someone else for the taxpayer. This includes wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, commissions, or the cash loan value of your life insurance policy. The IRS can also seize and sell cars, boats, houses, and other property held by the taxpayer until the tax debt is satisfied.

The IRS Bank Levy is the easiest attachment to levy. Most individuals and businesses have a bank account of some sort. Social Security Numbers (SSN) and Employer Identification Numbers (EIN) must be included in all applicable bank business, which is easily accessible to IRS searches by law.

The first Notice that a taxpayer receives from the IRS, or state tax agency, should be the signal that contact is necessary and resolution of a tax debt needs to take place quickly, either through installment agreement to pay, appeal, or payment. The IRS is required to release a levy if it is determined that one of a few factors takes place: 1) you paid the amount of tax that you owe; 2) the period for collection or statute of limitations ended prior to the levy being placed; 3) releasing the levy will help you pay your taxes; 4) you enter into an Installment Agreement and that agreement requires the removal of the levy as condition of the taxpayer’s; 5) the levy creates an economic hardship – where the IRS determines that basic living expenses cannot be met due to the placement of the levy; and, 6) the value of the property is more than the amount owed and releasing the levy will not prevent the IRS from collecting the tax debt that is owed.

Immediate contact with the IRS and resolution to a tax issue prevents elevation of the issue and steers the taxpayer clear of more dangerous roads that don’t need to be travelled on.