About the IRS bank levy
The word “levy” means “to take.” The IRS has the administrative power to levy or take all your cash assets from bank accounts in order to satisfy unpaid tax debts. The IRS may seize your assets at any point in time, but will typically only do this if it appears that you are being evasive and not making any effort to pay.
The IRS often go after bank accounts first as they are easier to locate and levy on.
Depending on the amount owed, a bank levy can be a repeated action. On top of that, banks will often charge a fee for handling the levy. IRS bank levies can be reversed, but it is a particularly complex process that should be undertaken only with the help of a tax professional.
Is there a difference between a levy and a lien?
A lien refers to a claim made on a property asset in order to secure payment for a debt. A lien is like a post it note that says “I owe the IRS,” but does not result in assets being taken from you immediately. On the other hand, a levy or garnishment is an actual seizure of assets. The levy enforces the lien.
When the IRS undertakes a tax levy, it is much more severe than a tax lien.
What happens when the IRS requests a bank levy?
The bank levy is one of the first enforced collection actions the IRS takes, since cash in a bank account is a relatively easy asset to seize and is an extreme action which forces you to take notice. Bank levies can be extremely difficult to deal with, since they can result in overdrawn accounts (for checks that are in the process of clearing) and leave you with little to no funds to pay for their basic living expenses.
When you receive a bank levy, typically it will be after the IRS has sent a notice of intent to levy and when it has not otherwise been able to convince you to pay. You may hear about the levy first from the bank, or you may receive a notice from the IRS first.
On receipt of a bank levy notice, the bank is legally obligated to freeze your bank account. The bank will then will place the money in a special trust account for 21 days. This is the only time you will have to contest the levy if you feel that it is unwarranted or will present a hardship.
Is it possible to prevent a bank levy?
Contesting a bank levy typically is only successful if you are trying to claim it as an error, or if you have sufficient documentation to show hardship. Hardship means that you cannot afford your basic needs, such as food, clothing, shelter and medical bills.
Even if you cannot contest this initial levy, however, or if the time has already passed, you should still contact a tax professional in order to prevent another levy from happening. Bank levies are typically repeated actions.
Types of accounts and assets at risk for an IRS levy
Just about any type of account or asset can be levied, including:
- Accounts receivable
- Bank accounts
- Investment accounts
- Retirement accounts
Even Social Security and Veterans benefits can be levied.
Act now to avoid or lift an IRS levy.
Our team of tax professionals can help you find relief from IRS tax pressure and stress associated with bank levies. If your bank account has been levied or your wages have been garnished, contact us right away for a free consultation.
We are former IRS attorneys, appeals officers, and auditors who help taxpayers with unpaid tax debts. We offer compassionate, individualized service at manageable rates.
Call today for a confidential consultation. Our number is 281-631-3300.