How You Can Stop a Bank Tax Levy

Staff Writer - Angela
May 14, 2018
How You Can Stop a Bank Tax Levy

While you may have heard the term, you might not know exactly what a bank levy is or what your options are for dealing with this serious issue. Everyone has a variety of payments they must make on a regular basis. From mortgage payments and taxes to your monthly utilities, it can be easy for these payments to pile up and cause some people to miss important payments. Creditors have one tool at their disposal to collect; a bank levy. Learn a bit more about it, and how to stop bank tax levy.

Bank Levy Basics

Essentially, a bank levy is a method for creditors to recover money they are owed that you have failed to pay. When a creditor decides that a bank levy is in order, they will contact your bank, and the bank will freeze your account and then send the requested funds to the creditor. Fortunately, before the levy can occur, the creditor must win a legal judgment and provide the bank with proof of this judgment.

One of the many unfortunate issues related to a bank levy is that your bank will freeze your account almost immediately after receiving the request and will not necessarily give you any warning. This means you could wake up one morning and find yourself without access to your money. However, because bank levies can only occur after a legal judgment, you are likely already aware that you’re having an issue with your creditor.

If a creditor requests a bank levy, you are not completely powerless. In fact, you have the right to dispute the levy. Exercising this right is crucial if you want to lower the amount of money that the creditor can take from your account. When you fail to dispute a levy, your account may be drained completely, making it virtually impossible to pay your other bills and putting you in even direr financial straits.

After noticing that your bank account has been levied, you should contact your bank directly so that it can tell you exactly who requested the levy and the amount they are seeking.

Stopping a Levy

There is no limit to how long a levy will last. As long as your debt remains unpaid, your bank levy can continue. It is also possible for multiple creditors to levy your account multiple times. To protect yourself and your assets, it’s important that you learn a few ways you can stop a levy and which methods are the most effective.

Identity Theft

One way to stop a bank levy is by proving that you have been the victim of identity theft. Basically, you would seek to demonstrate that you were not actually the person who requested or received the creditor’s funds, meaning you are not responsible for paying them back. While proving identity theft can be difficult, this may be a worthwhile solution if the creditor is seeking a large amount of money.

An Error Was Made

In certain circumstances, it’s possible that your creditor made an error. For instance, you may have already paid the debt in question, or the creditor might be seeking money that they aren’t actually owed. If you believe that your bank levy was a mistake, you should fight the issue so that the creditor cannot take your money.

Age of the Debt and Notification

When dealing with a bank levy, you should also consider the age of the debt in question. Some debts are subject to a statute of limitations, and if this time limit has passed, then your creditor should not have been allowed to request a levy.

While you aren’t required to receive notification that a bank levy has occurred, you do need to be notified that legal action is being taken against you. So, if your creditor is seeking a legal judgment in order to levy your bank and you can prove that you weren’t served, then you might be able to stop the levy.

Negotiations and Bankruptcy

Another way you can respond to a levy is by declaring bankruptcy. Although this will stop the bank levy, you should be aware that this solution is temporary. Your creditor may still levy your account in the future.

Perhaps the best way to deal with a bank levy is to negotiate a payment plan with your creditor. If you and your creditor are able to come to an agreement, it should end the levy and give you a little more control of your financial future.

Where Did the Funds Come From?

A factor that should not be overlooked when dealing with a bank levy is the source of the funds in your account. Certain types of funds are considered protected, which means that your creditor is not entitled to these funds during a levy. Once a bank levy has been granted, your bank should review your account to determine if any of your funds are protected.

One type of funding that is protected from bank levies is federal payments. If you receive federal payments such as Social Security, these payments will normally be protected from a bank levy. The exception is when you owe money to the federal government, in which case your payments may not be shielded.

Child support payments can also be protected from bank levies in many cases. However, child support can also make you vulnerable to a levy if you are behind on payments that you owe.

IRS Bank Tax Levy

Many bank levies are requested from private creditors. However, it’s also possible for the Internal Revenue Service (IRS) to levy your bank account. Because it involves the government, a bank tax levy can be a more serious situation.

Bank levies requested by the IRS will function in almost exactly the same way as a levy involving a private creditor. The biggest difference is that you may have a much smaller window of opportunity to deal with an IRS tax levy than you would a private levy. If you’re behind on your taxes, it’s important to learn more about bank tax levies and how you can respond.

When IRS Levies Occur

The most important thing to understand about a bank tax levy is when the IRS will request a levy of your account. Knowing if you’re likely to face a levy gives you a chance to prepare for this situation.

When you haven’t paid your taxes, the IRS cannot immediately request a levy of your account. Instead, it will send you a series of notices in the hopes that you will eventually pay what you owe. If you don’t respond to these notices, it will send you a Final Notice of Intent to Levy. This notice is meant to alert you that the IRS plans to levy your bank account.

If you receive a Final Notice, you should read this letter carefully so you will know exactly which of your assets the IRS plans to levy. In addition to your bank account, it may request a levy against your wages and personal property such as homes and vehicles.

Once this notice has been sent, the IRS is required to wait 30 days before taking legal action against you. If you want to avoid a bank tax levy, you should take steps during this period to resolve your tax debt. If possible, you should pay the IRS the amount you owe. However, if you don’t have the funds to cover your debt, you should get in touch with the IRS to negotiate a payment plan.

Allowing this 30-day period to pass without taking action will likely result in a bank levy.

You should be aware, however, that there are several circumstances where the IRS will not have to observe this 30-day period. For instance, if the IRS plans to collect your state tax refund to cover your debts, then it will not need to wait 30 days. Also, if the agency believes that waiting 30 days would threaten its ability to collect the owed taxes, it can proceed with the levy without delay.

Stopping an IRS Levy

Realistically, the only way you can stop an IRS levy is to pay the taxes it is requesting. Fortunately, once you have been notified that a levy has occurred, you have a fairly lengthy period in which you can respond.

As mentioned, you will have 30 days to make arrangements with the IRS to stop the levy. However, once this period has expired, the actual levy will take an additional 21 days. During this period, you can stop the levy by paying your taxes or developing a plan with the IRS to make your payments in the future.

Getting Your Money or Property Back

When the IRS seizes money from your account in a bank levy, it’s common to wonder if there is any way to get this money back. Regrettably, it is difficult to get the money back from the IRS after it has been taken. The reason for this is that the seized money will be put towards your taxes, which must be paid regardless of your circumstances. However, it may be possible to regain property that has been seized by the IRS.

If you owe a large amount of back taxes, it’s possible that the IRS will seize your property in order to cover these taxes. After this occurs, you can request a seizure release to request that the IRS return your property. If the property has already been sold, you can also request that the IRS give you whatever amount of money resulted from the sale. If either of these requests is denied, you have the right to appeal this decision.

In some cases, the IRS will return your property if it is determined that seizing your property has caused you some sort of economic hardship. Generally, however, there are several factors that the IRS will examine before it will return your property.

First and foremost, the IRS will check to see if you have paid your back taxes. If you have, it will usually return your property. Second, if it determines your property was seized after the collection period expired, your property will be returned. Third, if the IRS decides that releasing your property would make it easier for you to pay your taxes, it may release your seized property. Finally, if the property is worth more than the taxes you owe, the IRS may give back your property if it won’t affect your ability to pay your taxes.

Account Signatories

In some cases, you may be the authorized signatory on someone else’s bank account. For example, you may be a signatory on the account of an elderly relative who is no longer able to handle his or her own finances. If you are listed on someone else’s bank account, the IRS may levy this account in pursuit of your own taxes.

If this occurs, it is possible to have the levy released on the other person’s account. Look for Form 668-A(C)DO, and then find the telephone number listed on the form. Call this number, and explain to the representative that the funds in the account on which you are listed do not belong to you. You will likely need to provide proof that you are not the owner of this account. If you can prove these funds aren’t yours, the IRS should release the levy on the account.

Get Help With a Levy

Whether you owe money to the IRS or a private creditor, having your bank account levied can be a very serious situation that can put your financial future in jeopardy. If you’re facing a bank tax levy, then it’s important to take action as soon as possible. Get in touch with one of the debt relief companies that we have reviewed so that you can stop your bank levy and protect your financial interests.

 

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