Beware the IRS Bank Levy
It’s understandable to be concerned if you receive an assessed notice of tax debt. Fortunately, you have options at your disposal which will allow you to handle your liability in an efficient, affordable way. Disregarding your debt, though, can give you a good reason to worry.
While the IRS has programs designed to help delinquent taxpayers regardless of their financial capability, they have little tolerance for individuals who willfully ignore their duties. Depending on the size of your debt and how much time lapses without handling it, you could be facing a number of collection actions. Arguably one of the most devastating IRS tactics is a bank levy; one you’ll definitely want to avoid.
The first thing to understand that if you have a tax debt, you’ll be well informed. The IRS, rigid in protocol, will send you a series of notices before taking any type of collection action. They want to give you the opportunity to correct the issue and pay what you owe. Should you neglect these notices, the IRS may decide to simply take what’s due. It is also important to remember that the IRS only has an obligation to mail notices to your last known address only, and it is your responsibility to make sure your address is up to date.
A bank levy does just that; it’s a seizure of money to offset an unpaid liability. Your bank will be notified to suspend funds in your banking or checking account, typically for a period of 21 days. During this time, you have the opportunity to satisfy your debt or make arrangements with the IRS to do so with a formal resolution. If you have not reached an agreement to the satisfaction of the IRS within this timeframe, your funds will be taken and applied to your debt.
An unpaid tax debt leaves your checking and savings account vulnerable, but not strictly those in your name. An account belonging to a parent or spouse is also susceptible to a levy if your name appears as a secondary user. You may contest action taken against a family member’s account, but there are no guarantees the IRS will relinquish the funds.
In fact, getting a bank levy reversed is highly improbable. To make matters worse, the IRS can take what you have in the bank up to the full amount of your liability. If you have $5,000 in savings and your tax debt is $11,000, your account will be left with nothing and you’ll still owe $6,000. Plus any additional penalties and interest that will be assessed until the balance is paid in full.
If you’re notified that your bank account has been levied, you should take immediate action. Perhaps your best move is to consult with a licensed tax professional right away. Since you’re operating within such a narrow window of time, you’ll be pressed to come to terms with the IRS in haste. This does not leave you in the best position to negotiate, as your first concern will be to rescue your funds.
A licensed tax professional can handle your resolution objectively, working to release your money and present you with an optimal resolution to your tax debt. Further, they understand that action will need to be taken in an expedited fashion. A seasoned tax professional has the experience to provide a swift and decisive formal solution.
If you have a tax debt and have been fortunate enough to avoid a bank levy, time is still of the essence. Consult with a tax resolution company to determine how to best handle your tax issue. In all likelihood, you’ll have the option of a repayment plan, such as an Installment Agreement, that allows you to pay back what you owe in a way that meets your financial means. And this is a far cry from having your bank account reset to zero.