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Usually, when we get a call at our office, the person on the line is in panic. Our typical response is to tell them not to worry.
But in the case of a bank levy, we entirely understand the alarm. We understand how absolutely devastating a bank levy can be to financial stability and your mental health.
So the first question we ask without wasting any time is: “When was the levy placed?”
It is crucial to know the day the IRS placed the levy because, from that date, you have 21 days until your bank account will remain frozen. After the 21-day period is over, the IRS can remove those funds from your account to pay your tax debt.
But a bank levy can be stopped. In some cases, even if the IRS has withdrawn funds from your bank account, they can be brought back into your bank account.
First, let’s discuss what a levy is.
A levy is when the IRS legally seizes your property to satisfy your tax debt. The IRS sells or collects the seized property to pay your back taxes.
‘Property’ can be your home, car, boat, bank account(s), wages, retirement accounts, rental income, and so forth.
If you haven’t paid your back taxes and the IRS, after sending notices about the unpaid taxes, doesn’t get a response or a resolution, it moves on to more drastic steps such as a tax lien or a tax levy.
A tax lien is a claim to an asset by the IRS, whereas a tax levy. First, the IRS seizes the property (lien) and then sells it (levy) if the taxpayer takes no action to resolve the tax debt.
When the IRS places a bank levy, it offers a 21-day waiting period to the taxpayer to resolve the tax debt. This 21-day period begins from the date and time when your bank receives the levy notice from the IRS. After receiving the notice, the bank freezes your account for the amount specified by the IRS for 21 days. If the amount specified is the amount in your bank account or greater, your bank account is essentially frozen, and you cannot withdraw any funds from the account.
Even though you cannot withdraw, any money you put into your account after the levy has been placed is not frozen, and you are free to withdraw that amount.
If no action is taken by you during this 21-day period, the IRS asks the bank to transfer the money in your account to them. The IRS can levy more than one bank account, including a savings account, of a taxpayer.
The important thing to remember is that you will receive letters and notices from the IRS before it places the levy. A notice on back taxes is your cue to take immediate action to resolve the tax debt because it is simpler to avoid a bank levy than stop it.
To stop a bank levy, you or your tax resolution specialist will need to contact the IRS immediately when you come to know of the levy. It is better to get a tax expert’s help because the process of resolution is much faster, smoother, and less complicated.
It is only after a resolution is achieved by the individual affected that the IRS will stop a bank levy. A resolution doesn’t necessarily mean you pay the entire back tax due in one lump sum. It just means that you have entered into an agreement with the IRS to start paying the amount due. Depending upon your financial capability, an agreement can mean full payment, partial payment, no payment, or delayed payment.
Various factors are considered in achieving a resolution. The IRS largely sees the financial capability of the taxpayer when it comes to a resolution. We look to lower penalties and interest on the tax debt, consider the possibility of an IRS error, and see how comfortably our client can pay back the debt if he/she can afford to pay. These and many more factors are considered to provide maximum relief and affordability to our client.
There are a variety of resolution paths available to an individual. Taxpayers can pay their back taxes in installments, pay it in full, have their payment deferred in case of a temporary financial difficulty, or not pay at all a situation of a long-term economic distress. So no matter what your financial circumstances are, you can still resolve your tax debt permanently, legally, and effectively.
If you are facing financial difficulty, the IRS cannot force you to pay your back taxes. Even in such a case, the IRS can be asked to release the levy.
In case of a bank levy, even if the IRS has withdrawn funds from your bank account, you can still file a claim and have them return the funds to you, but only if you are facing financial difficulties and can prove proof.
The IRS’ definition of a financial problem or what they call ‘economic hardship’ is that you only have enough money to pay for your basic needs, such as a mortgage, utilities, food, and so forth.
According to the National Taxpayer Advocate report, the IRS has the ability to know which taxpayers cannot pay back their tax debt. Still, the agency fails to flag tax debt cases where the taxpayer is in economic hardship and cannot pay. So, even if you have been experiencing financial difficulties, the IRS can still come after you for back taxes.
If you owe back taxes, the IRS can levy your property, right to property, or any property in which you have a financial interest. These can be your home, car, boat, wages, retirement accounts, dividends, rental income, bank accounts, licenses, accounts receivables, the cash loan value of your life insurance, commissions, and more.
The IRS has a lot of power, but they need to follow a set procedure to collect back taxes, which begins by sending letters notifying you of your back tax due. If you receive an IRS notice that states that you owe back taxes, it’s time to contact the IRS or a tax resolution expert as soon as you can.
My name is Joe Valinho (President) and I built Justice Tax, LLC on one guiding principle – Justice for ALL taxpayers. Every day countless Americans who are worried and stressed ask our team of Attorneys, Enrolled Agents, and CPAs if we would fight for them. With $2.2 billion of back taxes solved and over 20,000 taxpayers helped, our answer is always “Yes” to getting the justice they deserve, and we can do the same for you and your family. Keeping with our founding fathers, “Life, Liberty, and the Pursuit of Happiness,” we created the Client Bill of Rights, ensuring that you receive RESPECT, while we navigate through the collection process. We will work countless hours to provide you FREEDOM from the IRS, and finally the Peace of Mind you deserve. We are on a mission to bring Truth, Justice, and Liberty for All taxpayers. Let us help you.