If you owe any taxes to the IRS and have not paid them or are in default of your taxes, then the IRS will start the debt collection process to recover the unpaid taxes. You may start to receive notices from the IRS urging you to pay your owed taxes, as well as phone calls or letters from the IRS. If you choose to ignore these reminders to pay outstanding taxes, the IRS can resort to bank levies to recover delinquent taxes.
What Are IRS Bank Levies?
A bank levy is an order by the IRS to your bank, financial institution, or any other place where you keep your money, to freeze your bank accounts and stop you from using them. If all the efforts for tax collection have been in vain, then the IRS can start Enforced Collection against defaulting taxpayers and levy their bank accounts.
Once a levy has been filed with your bank, you will not be allowed to touch that money or use your account until such time that the bank levy has been lifted or you have cleared your outstanding tax bill.
How IRS Bank Levies Work
The IRS will find out where you keep your money or who you bank with, and then file a bank levy on your account. If you have received any kind of bank interest or bank dividends, then it is very easy for the IRS to locate your bank accounts and other financial accounts through the form 1099, which you will have filed with your tax returns.
The IRS will then proceed with sending a Notice of Levy to your bank, which informs the bank that you owe taxes to the IRS and that they are attaching a bank levy on your accounts. As soon as your bank receives this notice, the bank will freeze all your accounts and you will be unable to use them anymore. Each and every account with your name on it will be attached to the bank levy, irrespective of whose account that is. So if your spouse or parents have an account with your name on it, then those accounts may also be frozen by the IRS bank levy.
Only the funds that are already present in your account can be frozen and not any additional funds. But this does not mean that additional funds are safe, as the IRS can levy your bank accounts any number of times, until such time that your tax liability is paid in full.
Living With An IRS Bank Levy
Living with a bank levy is very difficult. You will not be able to withdraw any money from your levied accounts. Your car payments, loan payments, regular household bills, expenditure on children, credit card bills, etc. will all have to suffer due to non-payment on account of the IRS bank levy.
Any checks that you may have signed, but have not been cashed yet will bounce. You will not be able to touch any part of the funds in your levied bank accounts. An IRS bank levy is one of the easiest ways for the IRS to recover their money, but will leave you with problems with other agencies.
Releasing IRS Bank Levies
Once your account is levied, the bank keeps those funds for a period of 21 days, after which the money is handed over to the IRS, never to be seen again. It is only within these 21 days that you can take any action to get your bank levy lifted.
Very often, the IRS levies your accounts erroneously. You may not have received their notices and may have thus been unable to respond, or you may not owe them any taxes at all; but whatever the reason for your bank levies, it is your responsibility to get it released.
If the IRS has levied your bank accounts, or you think there is a chance that they might; talk to a lawyer to try and come up with a solution to your tax problems.
Currently Indexing Over 75 'BluePages' Covering 1,000+ topics!