IRS Bank Levy Concerns? 11 Ways to Stop an IRS Tax Levy

Jill Bridges
Expert Contributor
Last Updated:
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When you owe a large amount of money to either a private debtor or the Internal Revenue Service (IRS), this debt can interfere with your financial stability. If you stop making payments to your debtors, they have the ability to pursue what they are owed by requesting a bank levy. This guide will walk you through the steps of the bank levy process.

Bank levies are extremely common, and issuing one is a method for the IRS and private creditors to recoup money that they have not been paid.

If you’re in debt and cannot make timely payments on that debt, then a bank levy is a possible outcome. Here are a the steps of the bank levy process:

  1. Your creditor will issue a levy on your account to collect your unpaid balance – the IRS will attempt to contact you prior; all other creditors will not.
  2. Your bank will place a levy on your account, meaning no funds can go in or out.
  3. You have the opportunity to dispute the judgment and stop the levy.

How Do IRS Bank Levies Work?

The bank levy process is actually very simple. Let’s say, for example, that you owe money to a creditor and haven’t made a payment in months. Frustrated that they have not received the money that they are owed, the creditor seeks a legal judgment against you. If the judgment goes in the creditor’s favor, they can go to a bank and request a levy of your account.

Your bank will immediately freeze your bank account after it receives the levy request.

IRS Bank Levy Concerns? 11 Ways to Stop an IRS Tax Levy

With a levy, you will receive no prior notice that your funds are about to be frozen.

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This policy prevents people facing a levy from removing all their money from their bank account. Once your account is frozen, your bank will review your funds and provide the creditor with whatever amount of money they are owed.

Dealing with the bank levy process can be extremely difficult. Until the levy is released, you won’t be able to access the money in your bank account.

This means that any checks you write may bounce and payments that you have set up to automatically draft from your account may fail to clear.

As you might imagine, a lengthy bank levy has the possibility of putting you in even more debt, as you will be unable to pay your bills.

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If you suspect that a creditor will request a levy against your bank account, it’s important that you act as quickly and decisively as possible.

Levies and Funds

One of the biggest complications of the bank levy process is that it’s possible your bank account will contain funds that are exempt from levies. However, once the money is in your account, telling which funds are exempt and which aren’t can be nearly impossible.

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If you think that your bank account is going to be levied, you should attempt to separate your exempt and non-exempt funds so that your money is protected.

  • The most common funds that are exempt from levies are the ones you have received from the government. Social Security payments, for example, will almost always be protected during a bank levy.
  • If you have been paid alimony or child support payments, these payments can also be exempt from a bank levy in certain circumstances.
  • People who receive workers compensation payments may be able to protect these payments during a bank levy. Similarly, retirement funds in your bank account, particularly those received from an annuity or pension plan, may be shielded from a levy.
  • Finally, a certain amount of your wages will be exempt from a bank levy. Unfortunately, if your account is being levied due to a failure to pay your taxes, you will likely not have access to any of these exemptions.

Dispute Your Tax Levy

When your bank account is being levied, you will usually have a chance to dispute the levy. While it may seem like a lost cause, you should never pass up this opportunity. Even if you’re not likely to win the dispute, it can delay the levy for a short period of time. It also has the potential to reduce the funds that you will need to pay back to your creditor.

If you decide to take zero action after your bank account has been levied, it can increase the seriousness of this situation.

For example, if the levy is not challenged, your bank has the ability to completely empty your bank account, which means you will have no money with which to cover your basic expenses. It’s also possible that your bank will impose a fee for handling the levy that you wouldn’t be able to pay.

Make sure you take advantage of your ability to dispute a levy so that you can lessen the impact of this circumstance.

IRS Tax Levy Process: Step by Step

  1. The bank levy process begins when a debt has gone unpaid for an extended period of time.
  2. Unable to retrieve their money through normal avenues, creditors will often decide to pursue a bank levy, which requires several important steps
  3. When a creditor has decided to request a bank levy, they will first need to receive the court’s permission.
  4. Once permission has been granted, the creditor needs proof in the form of the writ of execution. In certain states, once the writ has been acquired, the creditor will be required to hire a process server or Sheriff to execute the writ.
  5. After completing these steps, the creditor will need to locate the bank where the person who is being levied maintains their account. This can sometimes be difficult, as some states require that the levy be applied to the bank where the person’s account was initially opened.

For the bank levy process to be successful, creditors must perform a great deal of research to make sure they are levying the correct person. If the person being levied has an extremely common name, for example, it can be easy to levy the wrong account. If this mistake occurs, the money must be paid back. Usually, to make sure they are levying the right account, creditors will try to learn the Social Security number of the person in question.

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A bank levy can fail several ways, most of which involve incorrect paperwork. This can work to your advantage if it’s your account being levied.

Worried About a Bank Levy?

How to Stop an IRS Bank Levy

When facing a bank levy, it’s common to be overwhelmed by a feeling of powerlessness. Although this is certainly understandable, you should work past this feeling.

There are several effective ways that you can respond to a bank levy. In some cases, you can stop the levy completely. In others, you can limit the impact of the levy.

Statute of Limitations

If you believe that your bank account will be levied or you’re currently dealing with a levy, one of the first things you should do is research the age of your debt. Some jurisdictions apply a statute of limitations to debt collection. If you find that the statute for your debt has expired, you may be able to stop the levy.

Do I Have To Be Notified of An IRS Bank Levy?

A frustrating fact about the bank levy process is that you are not required to receive any notice before your account is frozen. However, when seeking the legal judgment that will allow them to levy your account, the creditor is required to notify you of their actions. If you were not legally served before the judgment was rendered and you can prove this fact, then it’s possible you can have your levy released.

Proving Errors

As mentioned, it’s common for creditors to make errors when pursuing a bank levy, and you can use these errors to stop a levy in its tracks. For instance, you may have already paid the debt, and if you have proof that the debt has been paid, the levy will end. You can also stop a levy by demonstrating that the amount your creditor is requesting is incorrect. This forces the creditor to start the levy process from scratch, buying you some time.

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Your Identity Was Stolen

Proving that your identity was stolen is another way for you to attempt to stop a bank levy. After your identity has been stolen, the thief may run up a great deal of debt in your name. Showing that it was the identity thief and not yourself who accrued the debt might result in the end of your levy. You should understand, however, that it can be time-consuming to prove that identity theft was the cause of your debt.

Should I Declare Bankruptcy to Stop an IRS Levy?

Declaring bankruptcy can be a temporary solution for stopping a bank levy. After you have been granted your bankruptcy, you will have some time to get your finances in order. However, your creditor will still have the ability to pursue another levy in the future, which means this solution should only be used in the most extreme circumstances.

Are IRS Levies Different From Normal Levies?

Several different institutions can levy your bank account, including government agencies such as the IRS.

The IRS uses bank levies to collect unpaid taxes, and while IRS levies are similar in many regards to levies by private creditors, there are some important differences:

  • For starters, the IRS must send you multiple notices before it tries to levy your account.
  • Generally, the more notices that you ignore, the stronger the language the IRS might use.
  • Eventually, if you have not responded to any of its requests, the IRS will send a Final Notice of Intent to Levy, which means it is preparing to levy your bank account.
  • After this Final Notice has been delivered, you will have 30 days to correct the situation.

If you fail to act during this period, the IRS will levy your account and potentially seize property such as homes, depending on how much you owe in back taxes.

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Due Process Hearing for an IRS Tax Levy

If you want to stop the IRS bank levy process from proceeding, you should use the 30-day notice period to request a due process hearing. During this hearing, you will attempt to argue that a bank levy is not an appropriate response to your failure to pay your taxes.

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Several arguments could be made during your due process hearing:

  • First, you could attempt to show that you actually have paid your taxes and that the agency has made some sort of clerical error.
  • Second, you could claim that the taxes should not have been applied because you were in the process of declaring bankruptcy.

Whatever option you choose, you should consider hiring an experienced tax attorney before your due process hearing. Tax attorneys know the correct way to communicate with the IRS and can make it more likely that your hearing will be successful.

Other Ways to Stop an IRS Levy

If you were unable to stop the IRS levy by requesting a due process hearing, you still have some options left. After the 30-day notice period, it will take an additional 21 days for the levy to be completed. During this period, there are multiple ways you may be able to stop your levy.

  • The easiest way to put a halt to your IRS levy is to simply pay your back taxes. Although this may not be possible for some people, if you have enough money to cover your unpaid taxes, you should strongly consider this option.
  • If you want to pay your taxes but do not have the money to do so, then you can take advantage of an IRS repayment plan. The IRS’s only goal is getting the money that it is owed, which is why it offers monthly payment plans that can help people meet their tax obligations.
  • It’s sometimes possible to end an IRS levy by claiming financial hardship. With this method, you would request that the IRS decide that attempting to collect your back taxes would be an undue burden because of your poor financial situation.
  • Finally, you could offer the IRS a compromise, meaning you are asking them to allow you to pay back a smaller amount than what you actually owe.

After learning about the bank levy process, you should be prepared if you’re ever faced with this complicated situation. If you’re interested in freeing yourself from debt for good, we have reviewed several debt relief companies that can help you achieve your financial goals.

5 Best Firm to Help With an IRS Bank Levy

Dealing with a tax levy on your own can get overwhelming quickly. Since stopping a tax levy can be complicated, it may be in your best interest to hire an experienced tax firm to handle the situation for you. Since it isn’t always easy to know which tax firms you can trust, we’ve compiled some companies with excellent reviews and expertise with stopping tax levies. Take a look at the tax firms below to find one that meets your needs.

StopIRSDebt.com

With its A+ BBB rating, 9.6 Solvable rating, and dozens of five-star reviews, StopIRSDebt.com is one of the best-rated tax relief firms you’ll find anywhere. Over the course of 10 years in business, this tax firm has resolved millions of dollars in tax debt, including cases dealing with tax levies, wage garnishment, and spousal issues. StopIRSDebt.com employs EAs to negotiate with the IRS on your behalf and tax attorneys to handle more complex legal issues, so you can feel confident that the firm can deal with tax matters large and small.

Community Tax

With its experienced staff of tax attorneys, certified public accountants (CPAs), and enrolled agents (EAs), Community Tax can assist you with anything from releasing tax liens and levies to handling incorrect filing issues and dealing with past-due returns. They have a 9.2 Solvable rating and are experienced at reducing Since Community Tax operates in all 50 states, the firm’s knowledgeable staff can assist you, no matter where you live in the United States. The firm has resolved over $400 million in tax debt and closes cases in an average of just four months, so you can anticipate an efficient resolution when you work with Community Tax.

Optima Tax Relief

Whether you’re based in the U.S. or you live abroad, Optima Tax Relief can assist with issues like releasing tax levies and representing you during audits to preparing back tax returns. This firm’s signature two-phase process is designed to offer fast tax relief, as its experienced tax representatives can investigate your case and proceed with the optimal resolution in as little as 12 weeks. Optima Tax Relief has an 9.0 Solvable rating and an A+ rating from the BBB, so you can trust that this firm has what it takes to resolve your tax issues.

Honest Tax

With its 8.4 Solvable rating, 133 customer ratings and A+ rating from the BBB, it’s clear that Honest Tax succeeds in its efforts to provide honest, reliable tax help. This firm has 50 years of combined experience with tax concerns and offers a wide range of expertise, from resolving federal and state tax debt to handling tax levies and small business tax matters. Since Honest Tax provides free consultations and complimentary initial investigations, you can set your wallet aside and feel good about working with this firm.

Enterprise Consultants Group

If you’re dealing with a tax levy related to a business tax filing, Enterprise Consultants Group can help. This firm handles a wide range of tax and small business issues, and its tax attorneys and EAs specialize in business tax matters. Whether you need an offer in compromise, an installment agreement, or criminal tax defense, Enterprise Consultants Group can help you find an efficient resolution.

 

 

 

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Jill Bridges
Expert Contributor
Last Updated: