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Bank Levy

Sometimes, a Bank Levy can be handled without professional help. In other situations, it is best to immediately hire a professional to help you navigate the situation. Learn more here at Tax Champions.

What is a Bank Levy?

Did you know that most creditors can take money directly out of your personal and business bank accounts if you owe them money While this is true, it’s not as easy as it sounds – unless you’re the IRS.

The IRS is the only entity that can legally withdraw funds from your account without a court order. Typically, creditors use this option when they’ve been unsuccessful in securing payment for the debt owed to them. The IRS defines a levy as “a legal seizure of your property to satisfy a tax debt. Levies are different from liens.

A lien is a legal claim against property to secure payment of the tax debt, while a levy actually takes the property to satisfy the tax debt.” A levy on one’s bank account is referred to as a bank levy. While the IRS has legal access to a multitude of collection actions, the revenue agent assigned to your case will examine your assets and determine which avenue will be most efficient in collecting the debt.

How Does a Bank Levy Work?

Before levying your bank account, the IRS will deliver a Final Notice of Intent to Levy and Notice of Your Right to A Hearing. This notice may be delivered by registered or certified mail, or in person at your last-known home or work address.

The taxpayer has 30 days from the date on the notice to respond before the funds in the bank account are affected. If no response is received within 30 days, the bank has a legal obligation to put a freeze on the funds in your account.

This freeze remains in place for 21 days, giving the taxpayer another opportunity to contact the IRS to resolve the debt. A bank levy remains active until enough funds are seized to satisfy the back-tax debt, as well as penalties and interest that has accrued.

How to Stop a Bank Levy

The IRS accommodates a variety of opportunities to stop, reverse or reduce a bank levy. Some options aren’t suitable for all taxpayers. Consult with a qualified tax professional to learn about the options available in your individual circumstances. All taxpayers have access to at least one of the following options:

Lump Sum Payment in Full

If no response is received by the taxpayer after the 21-day period in which the bank has frozen his or her account, the IRS takes possession of the funds and applies it to the outstanding balance in your tax case. However, if the taxpayer responds to the IRS with payment in full, including interest and penalties, the IRS will remove the levy from his or her bank account.

Collection Due Process Hearing

Included in the envelope with the Final Notice of Intent to Levy is a Notice of Your Right to A Hearing. This notice is in reference to a Collection Due Process hearing with the IRS.

The hearing gives the taxpayer an opportunity to express why he or she believes the levy shouldn’t be executed. It’s common for hearings to have favorable outcomes if one of the following is the case:

  • The Final Notice of Intent to Levy was issued in error because the taxes have already been paid in full,
  • The taxpayer has an open bankruptcy proceeding,
  • The deadline to collect on the tax has passed, or
  • An administrative error initiated the levy process.

Extraordinary Financial Hardship

Determining the severity of financial hardship is subjective for everyone. Therefore, hard and fast guidelines for declaring financial hardship are far and few between. Discuss your circumstances with a tax professional to most effectively present an explanation of your hardship to the IRS.

If the IRS agrees to lift the levy due to financial hardship, they’re likely to cease further collection efforts until the taxpayer is back on his or her feet.

Payment Agreement

The IRS may lift a bank levy if suitable payment arrangements are agreed upon. This may be done in installments or an offer in compromise. Collection efforts are not exerted while the taxpayer makes monthly payments on his or her back-tax debt, including further attempts to levy bank accounts and wages.

What to Do Next

If you can resolve your back-tax debt by paying the full amount in one lump sum, simply contact the IRS directly for instructions.

There’s no need to hire professional tax representation in this case. Taxpayers with circumstances more suited to another option should contact a reputable and experienced tax professional. With their fingers on the pulse of the tax law and IRS procedures, tax professionals have a unique ability to present your case to the IRS for the best possible outcome.

Tax Champions has been working with clients in need of tax relief for over 35 years. We’re especially skilled in negotiating terms with the IRS that empower our clients to establish good-standing with them through affordable payment plans.
We invite you to contact us today for a free consultation with no obligation to hire our firm.

We’ll happily discuss your circumstances to help you discover the best options that you qualify for. If you decide that we’re a good fit for your needs, our staff will get to work immediately to stop the levy and release the funds in your bank account as soon as possible.
We can be reached at 888.518.8964 during the day and evenings, seven days a week, or we can reach out to you instead; just submit your contact information to us in the blue box on the right side of this page.
Our compassionate and knowledgeable staff is ready to help you sleep better tonight. Contact us today.

 

Sources 

[1] What is a Levy?. (2018, November 5). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/what-is-a-levy

[2] Filing Past Due Tax Returns. (2019, February 22). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/filing-past-due-tax-returns
[3] Collection Due Process (CDP). (2019, April 9). Retrieved from //www.irs.gov/appeals/collection-due-process-cdp

Walter Wotman, CPA

Founder & Managing Partner

Walter Wotman, CPA is the author of "Tax Champions Guide to Tax Resolution." Amazon #1 Best Seller in the Personal Finance category. He is one of America's most experienced tax negotiators with over 35 years of experience helping thousands of clients settle difficult back tax issues.
Copyright Tax Champions 2017