IRS Bank Levies

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Did You Receive a Notice of Intent to Levy Bank Your Account?

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One of the dangers of having unresolved state or federal tax debts is that the debtors have exposed themselves to the crippling possibility of a bank levy.

A bank levy is when the IRS or state taxing authority removes the amount of unpaid federal or state tax debt from the debtor’s bank accounts. Without obtaining a court order, the state and federal government can act quickly to seize funds from any account to which the debtor has access, including checking, savings, CDs, and money market accounts. If the debtor’s accounts are insufficient to satisfy the entire debt, future deposits will also be seized until the entire amount is paid.

The bank levy process

Once a levy notification is sent to the debtor’s bank, there is very little time to act before the debtor’s accounts are emptied and, once seized, it is extremely difficult to get the funds back from the government.

In cases of unpaid federal taxes, once the levy notification is sent to the bank, the debtor only has 21 days to resolve the tax debt before the funds are released to the IRS. States, on the other hand, are even more aggressive at collecting unpaid tax debt, with some only giving the debtor 72 hours to resolve his or her debt before the money is given to the state taxing authority.

How a levy on your bank account can affect your finances

Bank levies can be devastating to a tax debtor by preventing access to one’s hard-earned paycheck and depleting life savings. A bank levy can easily turn a family who is living paycheck-to-paycheck into one in dire circumstances. Once the levy is initiated, debtors are unable to access their direct deposit paycheck, savings, or other funds, causing them to fall behind on other bills and thus making future bank levies inevitable.

Because of the serious nature of a bank levy, the severe financial repercussions, and the speed with which the funds are seized, it is important to obtain the help of an experienced tax law professional as quickly as possible, either at the beginning of the process or before a levy is started. An experienced tax professional can assess your tax situation, find the best resolution to alleviate future bank levies, and negotiate with the IRS and state taxing authorities on your behalf.

How to stop a bank levy

By the time a bank levy appears on an account, many individuals think it’s too late to do anything about it. But that is far from the case. Once you have hired a bank levy attorney, there are a few options you and your lawyer can explore to have it removed:

Contact the IRS directly to dispute the bank levy
Negotiate a payment arrangement
Show proof that you have been a victim of identity theft (if applicable)

Key Tax Group can protect your hard-earned money with an affordable tax resolution

At Key Tax Group, we understand that you need access to your hard-earned money to support yourself and your family. That’s why we work quickly to establish an affordable tax debt resolution to protect our clients’ paychecks and life savings. To receive your free initial consultation with the tax law specialists at Key Tax Group, contact our office today.

Bank Levy FAQs

Q: What happens if the IRS levies my bank account?

When a person receives an IRS notice entitled a Final Notice of Intent to Levy and Notice of Your Right to A Hearing, the agency is preparing to take the money out of your bank account. After a levy is placed on a bank account, the Internal Revenue Code (IRC) allows for a 21-day waiting period in which a person can comply with the levy.

An IRS levy involves the IRS seizing funds directly from your bank account to cover any back taxes you owe. The IRS will typically contact your bank about the taxes you owe.

A bank will have to freeze any bank assets for 21 days from the day it receives an IRS notice, and failure to take action can lead to the bank sending all necessary funds to the IRS. An IRS bank levy only impacts the current funds in the account, meaning it cannot affect any future deposits.

An IRS bank account levy will let the government take funds directly from your bank account to pay off any tax liability, and the IRS sends you a notice of its intent to levy the bank account. The agency will usually send a notice to your bank informing it of the levy and specifying how much money needs to be withdrawn from your account.

After funds are withdrawn, a person will have 20 days to request a hearing with the IRS to explain why the levy should be released. If a person does not request a hearing or the IRS does not release the levy, the money will be used to pay off the tax liability.

When you become subject to an IRS bank account levy, you will want to try to stop the process as soon as possible by directly contacting the IRS and asking about how you can dispute the levy. You may have to provide documentary evidence that proves your account is being levied in error or other kinds of documentation proving why the amount due on your taxes was either reduced or eliminated.

You will want to work with an experienced tax relief professional for help disputing a bank account levy with the IRS because you may be able to get your funds released from hold and avoid any further penalties for late payment.

Q: How much can the IRS levy from my bank account?

The IRS can levy up to the total amount a person owes in back taxes, and a bank must comply. For many people, this can mean everything in their entire bank account will be completely seized.

When a person does not have sufficient funds in their account to cover a levy, then the IRS may levy the account again later on. Levies cannot occur after the 10-year statute of limitations for the IRS collecting debts expires, but during the 10-year period, there will be no limit on the number of times the IRS can levy an account.

Q: Can the IRS levy your bank account without notice?

Yes, the IRS can do this, although it is a rare occurrence. In most cases, the IRS will send several notices to a person until there is a Final Notice of Intent to Levy.

A Final Notice of Intent to Levy usually states that the IRS intends to levy a bank account, wages, or some other property with the necessary value to cover a tax bill. The IRS legally cannot take any action until 30 days after sending this notice.

During this time, a person must pay their taxes in full and contact the IRS about either setting up a payment plan or making some other kinds of arrangements. When a person does not do anything, then the IRS can legally seize their assets.

Before the IRS can take a person’s assets, it must assess a tax liability and send a notice to demand payment, the taxpayer needs to ignore or decline to pay the taxes due, the IRS must send a “Final Notice of Intent to Levy'' 30 days prior to any levy, the IRS must send the notices to a person’s last known address or their work address. After a person receives their final notice, a levy can occur after 30 days have passed.

The cases in which the IRS might levy a bank account without providing a 30-day notice of a right to a hearing include cases in which the IRS plans to take a state refund, the IRS believes the collection of tax might be in jeopardy, or a person was served a Disqualified Employment Tax Levy.

Q: How long does it take for the IRS to levy your bank account?

The IRS customarily cannot issue a tax levy until it first sends out several written notices, usually at least four. It can take up to six months from the due date of a payment until the IRS can legally levy on a bank account.

The last IRS notice is a Collection Due Process Notice, which states that a person has the right to request a hearing. Such a notice is sent on IRS Form Letter L-1058 or IRS Form Letter L11.

If a person responds in writing to the notice within 30 days of the mailing date, the IRS cannot legally serve a levy on a bank account until the person has had a hearing before an IRS Settlement Officer. At a Collection Due Process (CDP) hearing with a Settlement Officer, a person will be able to request an installment payment agreement, an offer in compromise (OIC), or any other collection alternative.

When a person cannot come to an agreement with the Settlement Officer at the CDP hearing, then the officer will issue a Notice of Determination. The CDP Notice of Determination gives the taxpayer an opportunity to file a Petition with the United States Tax Court, and such a petition must be filed within 30 days of the mailing of the Notice of Determination.

After a levy is placed on a bank account, the IRC again provides a 21-day waiting period for complying with a levy. The IRS cannot legally take any money until 30 days after sending a Final Notice of Intent to Levy.

Q: How do you protect yourself from a bank levy?

The simplest way to avoid an IRS bank levy is to file your tax returns on time and then pay your taxes when they are due. You can also request an extension when you need more time to file, and you can work with the IRS to resolve a remaining balance when you cannot pay what you owe.

One possible IRS solution may be a payment plan, under which a person signs an agreement with the IRS to pay their taxes owed within an extended timeframe. The previously mentioned OIC also allows some people to resolve their tax debts for less than the full amounts they owe.

Some people may even have other options available to them. The key in these cases can often be getting the help of a Jacksonville tax attorney.

Q: What is a state tax levy deduction?

State tax levies are similar to IRS levies except that it is the state that is the party seizing assets in these cases. State tax levies may include measures such as wage garnishment, bank account seizures, or property seizures.

Just as the IRS does, the state will notify people of their tax debts and begin issuing a series of notices. These cases involve back taxes specifically owed to the state, not the federal government.

Q: Why is there a tax levy on my paycheck?

The IRS is permitted to legally garnish your wages when you have an overdue balance, and it has sent a sufficient number of notices to you about your tax debt. The IRS cannot take your entire paycheck but has to comply with exemptions established under IRS Publication 1484.

The IRS may garnish wages when a bank account does not have enough money to satisfy a tax debt. A wage garnishment plan may continue until a tax debt is satisfied.

Q: How do I stop tax levy on my paycheck?

There are multiple ways you can stop wage garnishment. The easiest way to do this is to simply pay your tax debt in full.

When you do not have the resources necessary to pay an entire tax debt, you can set up a payment plan. If the payment plan seems unreasonable to you, you can also negotiate an OIC.

If a levy on your wages, bank, or other account is causing an economic hardship preventing you from meeting basic, reasonable living expenses, the IRS may work with you on achieving a levy release through a payment plan or other steps that allow you to still pay off your balance. You could also avoid garnishment by simply filing for bankruptcy.

The best way to deal with any kind of garnishment will be to contact an experienced tax resolution specialist. Key Tax Group has a team with a background in dealing with both revenue officers and aggressive collectors, so we know how to help people achieve the most favorable resolutions to their cases.