People work extremely hard for their money. Whether you go to college or enter the workforce immediately after high school, it takes years to get on your feet and amass any semblance of savings. Rent or mortgages cost money, food on the table costs money, and necessities like heating, water, and healthcare all cost money.
You’ve worked far too long and hard to lose it all to the Internal Revenue Service (IRS). When you fall behind on taxes, they can take what they deem appropriate from your wages, savings, retirement accounts, and even assets like vehicles.
What should you do when the IRS is about to freeze or freezes your bank accounts? The first step is to understand your rights and then get help on your side.
When you have an income tax debt, there are several actions the IRS can legally take to collect the money you owe. These include:
Of these consequences, seizing your bank accounts is typically the most serious.
The IRS is required to give notice before they freeze your account. You will receive a final notice before a bank levy is issued. Failure to respond to this notice will result in a levy, at which point you will have a maximum of 21 days before the bank must turn the funds over to the IRS.
Wage garnishment cannot exceed a certain percentage. However, if the IRS places a freeze on your checking, savings, or another bank account, they can remove all the funds that are in the account at the time of the freeze, up to what is owed. To collect further deposits to the account, the IRS would have to initiate the freezing process again.
Retirement funds are also fair game for the IRS, including social security payments and any other form of a pension. In addition, a tax lien placed against your property can allow the IRS to force the sale of real estate or other property and collect funds from the sale to satisfy your debt.
A common way that the IRS goes after your money is with a bank levy. When a bank levy is initiated, it freezes your bank account, which means you can’t touch whatever money is in there. Even though the account is still in your name, the bank levy legally gives the IRS temporary control over it.
The IRS taking control of your finances and assets can leave you feeling absolutely powerless—but it’s important to remember that you have options. Once the IRS sends you a Final Notice of Intent to Levy, you have 30 days to request an appeal or Collection Due Process (CDP) hearing.
If you fail to take any sort of action within 30 days, the bank levy takes effect. Your funds are frozen and set aside by the bank for 21 days. By the 22nd day, the bank is required to send the funds to the IRS. If you don’t have enough funds in your bank account to cover the tax debt, the IRS can take further action by going after your wages and property.
It is important to act within 30 days of receiving a Final Notice of Intent to Levy. Attempting to settle the debt or appealing the actions of the IRS are the two most common courses of action to buy more time. If you fail to initiate an appeal or settle the debt by then, you can still get help during the 21 days and seek for a bank levy release. However, the process is complicated and not easy to do on your own. To help ensure the best possible outcome, you’ll need the assistance of a qualified tax professional.
The Internal Revenue Service is required by law to take a certain course of action before it can secure a bank levy. This process allows the taxpayer time to act before drastic measures like wage garnishments or property and account seizures go into effect.
As mentioned, the IRS needs to send you a Final Notice of Intent to Levy. This formal letter from the IRS will be delivered to the mailing address on file from the tax agency. Unfortunately, there are cases in which the taxpayer does not get the letter because it was mailed to a former address. Regardless, the IRS will attempt to contact you and notify you of their demands and appropriate forms of response.
You now have 30 days to take your first course of action. Depending on your financial situation, you may have the ability to resolve the tax debt and eliminate the possibility of a bank levy or wage garnishment. However, in many circumstances, the taxpayer doesn’t have that type of money sitting around in a bank account.
If you are unable to pay the debt in full, you can also consider entering an installment agreement. An IRS installment agreement is a payment plan like one you might have with a credit card company or on a car loan. You’ll make monthly payments to resolve the debt over time. However, it is worth mentioning that the IRS has the power to reject the option even if you are willing to resolve the debt through an installment agreement. The same is true of trying to prove financial hardship for debt forgiveness.
Next, the IRS will enforce an official bank levy on your accounts if you don’t act within 30 days of the Final Notice of Intent to Levy. However, you still have a defense to avoid everything in the account getting seized by the U.S. government.
The IRS must wait 21 days to remove the funds that are currently frozen by your financial institution. While you are not allowed to touch the money during these three weeks, the IRS also cannot withdraw the funds. Consequently, seeking a bank levy release during these 21 days is crucial because, on the 22nd day, the IRS can (and will) secure the funds. Furthermore, if the funds are not enough to cover the debt, they’ll also go after your property and wages.
You have options to fight back against the IRS and a bank levy. You can appeal the decision made by the IRS and request a Collection Due Process (CDP) hearing. However, you need to act immediately after receiving the final notice. Never wait until the last day of a notice to reach out to a tax professional. By then, it may be too late to fight on your behalf!
When the IRS announces an intention to levy your assets, the most important thing is to NOT ignore the notice. If you do nothing, you will lose your money. However, the good news is that the IRS wants to collect the full amount owed and is typically willing to work out a payment arrangement.
If you receive notice, it’s a good idea to consult with a tax resolution specialist regarding your options. Depending on the amount of taxes you owe, you may be eligible for an installment agreement, an Offer in Compromise, or to possibly be declared currently not collectible. A tax resolution firm can help you get the best settlement possible from the IRS, without draining your bank accounts.
If you are facing a levy and want help from the best, click on the form to the right or call 88-411-5389 (LEVY), and someone from our A+ BBB Rated staff will contact you immediately.
Remember: “YOU WANT A LEVY ON YOUR SIDE, NOT ONE AGAINST YOU.”
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.