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IRS Bank Levy: Laws and Process of Bank Account Garnishment

An explanation of a bank account levy, also known as a bank levy. A very familiar method exercised by the IRS in their effort to gather back taxes is a bank levy. This form of tax levy occurs when the IRS notifies the bank about the impending levy, and sends you an official notice about their intent to levy. To discharge the levy, you usually have twenty-one days.

The bank will hold the funds for a maximum of twenty-one days and then they will release the funds to the IRS. The IRS continues to take amounts from the bank account pending the ability to satisfy the tax debt owed, plus any penalties and interest incurred over time. If you act fast, you are able to minimize the damage and be in control.

When is a bank levy utilized and the requirements the IRS needs to fulfill before implementation.

The IRS utilizes the bank levy method to recoup unpaid taxes because it is quick and easy, and the IRS only needs to put in minimal effort. When deciding the type of levy that will be beneficial, they will first look at your current financial situation.

After thirty days have passed, your bank will be contacted by the IRS to get information regarding the amount of money you presently have in your personal bank account. If the IRS believes you have adequate funds deposited into your account, they will demand that the bank immediately freeze your account so that they may be able to levy.

If there are not sufficient funds in your account, the IRS will not choose a bank levy. Instead, the IRS will then look into your current employment situation and see if they can utilize the method of wage garnishment.

There is a process the IRS must abide by before putting a levy on your bank account. It cannot levy an account unless these three specific conditions are met:

  • The IRS has assessed the owed tax amount and required payment on back taxes.
  • The taxpayer, upon receiving the assessment, fails to pay back taxes or resolve the situation.
  • The IRS emails a final notice to the taxpayer that clearly states the intention to levy in thirty days.

If these three conditions are satisfied, the IRS is legally allowed to make contact with your bank to make the final determination if a levy on your bank account is the appropriate method in order to seize funds to pay back taxes.

How to handle a bank levy from the IRS?

There are different actions to take after the IRS puts a levy on your account. The method you can use often depends on your current tax and financial situation. You can put an end to a bank levy, but you need to act quickly because there is not much time available to stop the IRS once they execute a bank levy.

Eliminate or stop the bank levy from the IRS.

There are different methods you can utilize to stop a bank levy. However, your financial situation will dictate which method best suits you. You must keep in mind that the IRS does not want to put a levy on anyone, but it will do so when they have no other option to receive payment. There are other ways through which the IRS would like to resolve tax problems, and they are prepared to work with you even if the collection process has gone this far.

Have the tax levy appealed.

If you are not in agreement with the IRS decision and believe that the levy has been placed on your bank account unlawfully, you are able to appeal.

You can even appeal after the initial thirty days have passed after you received your final notice regarding the intent to levy. The only drawback of filing for an appeal following the thirty days is that you do not have the ability to go to court in an effort to dispute the appeal result dictated by the IRS.

However, you still have the ability to fight the IRS appeal decision in court if they decide to keep the levy and turn down your appeal. The process of appealing is a fair one. It is conducted by an intermediary to eliminate any possibility of bias, this way you are assured you will be provided with a fair hearing.

IRS bank levy assistance.

If you are facing an IRS bank levy and it is too late in the collection procedure, you should take the assistance of a tax professional. If the IRS has put a bank levy on your account it means that they have already decided that you are not willing to discuss with them the current tax situation and how to come up with an effective solution.

If you appoint a tax professional responsible with facilitating the resolution of this problem, the IRS then sees you as willing to take the necessary steps to resolve the unpaid back taxes, and then they are more willing to create a just resolution. Remember, the IRS does not want to place a levy and want to find the most amicable solution to your tax problem.

Which is the best strategy for you? Find out now.​