An IRS bank levy is when the IRS seizes the funds in your bank account to cover your back taxes. This is an advanced collection tactic. The IRS usually only levies bank accounts if you owe a substantial amount and have ignored the requests for payments.
A bank levy is very serious, and you should reach out to the tax attorneys at W Tax Group for help if the IRS has threatened to levy your bank account or already contacted your bank.
How Do You Know If the IRS Is Going to Levy Your Bank Account?
Before levying the funds in your bank account, the IRS will send you a Final Notice of Intent to Levy. You must take action within 30 days if you want to stop the enforcement. You can pay the tax in full, appeal the levy, or contact the IRS to set up a payment plan or make other arrangements on your tax bill.
If you ignore the notice, the IRS can seize the funds in your account. The agency may also garnish your wages, take your tax refunds, or pursue other collection actions.
In rare cases, the IRS may not have to wait 30 days before levying the assets in your account. If the IRS feels like the collection is in jeopardy or if you have a disqualified employment tax levy, it can assess your bank account sooner.
What to Expect When the IRS Levies Your Bank Account
The IRS will find your bank accounts based on the information you provided on your tax return or by using your Social Security Number. The agency will send Form 668-A9(C)DO to your bank, and your bank will immediately freeze your funds. You have 21 days to pay the tax in full or dispute the levy. Otherwise, the bank will send the funds to the IRS.
During the 21-day period, those funds are frozen. You will not be able to access them. If you have outstanding checks or automatic payments, you should make a deposit to cover them or they may be returned by the bank.
The assessment only affects the funds in your account when the bank receives the levy notice. Additional deposits will not be seized unless the IRS sends another levy.
How to Deal With Bank Levy Errors
In some cases, the IRS may initiate a bank levy in error. For instance, if your name is on someone’s bank account but you don’t use the account, the IRS may apply a bank levy to that account. This often happens when an adult child is on their parent’s account or if a parent is on the account of their disabled adult child.
In these cases, the account holder or their power of attorney should call the IRS at the number on the Form 668-A(C)DO. They need to explain that the money in the account is theirs and it does not belong to the taxpayer. The IRS may request proof of this claim, but the agency should release the enforcement.
Bank Levy When You’ve Already Paid in Full
If you’ve already paid the tax liability in full when the IRS sends the enforcement notice, your bank may charge you a fee to process the levy. You may be able to get a refund of the fee if the following are true:
- The IRS caused the error.
- You didn’t contribute to the error.
- You responded to IRS requests for information before the assessment in a timely fashion.
To request a refund of the bank fee, send Form 8546 (Claim for Reimbursement of Bank Charges) to the IRS.
How to Stop an IRS Bank Levy
To stop a bank levy, you need to take action when you receive the Final Notice of Intent to Levy. Here are your options:
- Appeal the levy by requesting a Collection Due Process (CDP) hearing.
- Pay the tax liability in full.
- Set up an installment agreement.
- Apply for an offer in compromise.
- Demonstrate that the levy causes financial hardship.
- File for bankruptcy — this will create a stay that will temporarily stop the levy, but you will not necessarily be able to discharge your tax bills through bankruptcy.
If the tax bill was due to identity theft, you need to reach out to the IRS and file Form 14039 (Identity Theft Affidavit).
Can You Get Back the Funds From a Bank Levy?
Once the IRS has taken the funds from your bank account, you can request to get them back, but in most cases, you will never get that money back. It will be applied to your outstanding tax balance.
Get Help with an IRS Bank Levy
Do not let the IRS take the money from your bank account. Get help from a qualified tax attorney before the IRS levies your bank account. At The W Tax Group, our tax attorneys have extensive experience helping our clients avoid bank levies and negotiate with the IRS. To get help, contact us today.