IRS Bank Account Levy – What Do You Need To Do Now?
If you have a long overdue tax debt, your bank account may be at risk of being levied by the IRS. An IRS bank account levy is a serious collection action that permits the IRS to seize money from your bank account to satisfy your debt, leaving you with less or no money to live on. Once the IRS takes your funds, you may not be able to retrieve them, putting you in an even more difficult financial position. Therefore, when you receive that initial notice from the IRS, it’s crucial to act quickly to safeguard your assets and prevent the IRS from placing a levy on your account. In this article, you will discover how bank account levy works and what steps you can take to stop it from happening.
How the IRS Can Seize Your Money
When you have an unsettled tax debt, the IRS can legally seize funds from your bank account to cover the taxes you owe. This procedure is called a bank levy. However, it is important to understand that a bank levy does not occur only after an initial warning. The IRS typically sends several letters to inform you of your outstanding balance and the deadline for your payment. If no action is taken, the IRS will eventually send a Final Notice of Intent to Levy, which will give you a window of 30 days to settle your tax debt before they initiate the levy.
Once the 30-day period has passed and you still haven’t come up with a resolution to settle your tax due, the IRS may send Form 668–A(C)DO to your bank. The IRS will require your bank to hold your fund for 21 days, providing you with a last chance to resolve the issue. During this time, you will not have access to your account and you will not be able to withdraw these funds.
If you reach an agreement with the IRS within the 21-day holding period, the IRS will lift the levy placed on your account. If no agreement is reached, the bank must transfer your funds to the IRS.
Note that bank accounts such as checking and savings and even your retirement accounts can be subject to a levy. The IRS can also issue multiple levies to your bank account until your tax liability is fully repaid.
4 More Ways a Tax Debt Can Cripple Your Finances
A bank levy can have severe consequences for your financial stability. Not only will you lose access to your bank funds, but it may also result in bounced checks and overdraft fees. Additionally, if your account does not have enough funds to cover the outstanding tax debt, the levy can cause financial distress and disrupt your ability to pay essential bills and expenses.
Moreover, the levy may negatively impact your credit score in the long run, making it difficult to secure loans or credit in the future.
Fighting Back Against a Levy
If you believe that the IRS has made an error or you have valid reasons to challenge the levy, you have the right to appeal the decision. You can request a Collection Due Process (CDP) hearing with the IRS Office of Appeals. During this hearing, you can present your case and provide evidence to support your claim. It’s crucial to act quickly and file for an appeal within the specified time frame to protect your rights.
Releasing a Bank Account Levy
If your bank account has been levied, there are ways to have the levy released. The fastest way is to pay your tax debt in full. However, if you don’t have enough means to pay your entire debt, one option you may consider is to work out a payment arrangement with the IRS, such as an installment agreement, or an offer in compromise. By showing a genuine effort to settle your tax debt, the IRS may lift the levy. Additionally, you can request a hardship exemption if the levy is causing severe financial hardship.
Safeguard Your Finances From Future Levies
Preventing a bank account levy requires staying up-to-date with your tax obligations. If you are unable to pay your taxes on time, consider filing for an extension or arranging a payment plan with the IRS. Prompt communication with the IRS about your financial difficulties can prevent them from issuing levies.
Furthermore, seeking professional guidance during challenging times can make a significant difference in resolving your tax issues and ensuring not only the protection of your financial well-being but also your peace of mind.
Conclusion
In summary, an IRS bank account levy can significantly impact your financial stability and cause considerable stress. Understanding how the levy process works, seeking professional help when needed, and staying proactive in your tax compliance can go a long way in safeguarding your finances from potential levies. Learn more about what to do when you get a levy notice by reading our free report ”IRS Levy Notice — Here Is How to Handle in Four Ways’.
Remember, the key to avoiding a bank account levy is to address your tax obligations responsibly, communicate with the IRS in a timely manner, and seek assistance promptly if you encounter challenges in meeting them. For any tax-related concerns, call us at 775-304-1040 to schedule a free, no-obligation consultation with our tax expert.