When Your Hard-earned Money Is at Risk—The IRS Bank Levies
If the IRS has levied your account, you have only 21 days to submit all the necessary documents and secure a release before the money is gone. Time is of the essence, so please contact us immediately!
One of the most powerful and vicious collection tools in the IRS toolbox is the bank levy. It allows the government to take all of the cash in your account up to the amount of your debt.
In other words, if you owe the IRS US$10,000 and you have US$12,000 in your bank account, a levy will take US$10,000 and leave you with US$2,000. If you have US$8,000 in your account, the IRS will take all the money, leaving you with nothing.
Making matters tougher on the taxpayer, the IRS does not need to get a court order, or make any real effort to collect from you, before draining your bank account. All the government is required to do is send a series of letters to your last known address. Whether you receive them, respond to them, or whether the address on file is current is of no consequence.
Once the IRS has your money, it is challenging to get it back. The burden is on you to prove that the levy created an unreasonable hardship, such as resulting in your being evicted from your home, for example.
The best way to prevent a bank levy is to face your tax issues head-on, providing the IRS a completed financial statement, Form 433-A, and all of the supporting documents. As a part of this process, you may need to file missing or delinquent tax returns.
Do not wait for someone to knock on your door, as this generally happens only after your bank accounts have been taken. It is up to you to be proactive and contact the IRS to resolve your debt.
If your account has been levied, you will need a completed financial statement and supporting documents to prove the levy created a hardship and that it should be released.
You should also note that a bank levy is a one-time event. For example, let’s say your bank received a levy on Monday. They will pay all items that posted that day and then execute the levy, depleting your account. If you make a deposit on Tuesday, the IRS has no right to that money…the levy only applied to your balance at the end of the day on Monday. Of course, the IRS can send a second levy to get additional deposits.
If you are concerned that the IRS may levy your account, you have several options:
- Move your account to a new bank.
- Keep a minimal amount of money in your personal bank accounts. Make your deposit and immediately pay all bills.
- The IRS can levy any personal bank account in your name. If you have a joint account, remove your name to protect the other party.
For example, a son is a signatory on his elderly father’s account, for estate-planning reasons. The IRS can take all of the money from this account, up to the amount of the debt. The son’s name should be removed from this account until his tax issues are resolved, either by an Offer in Compromise, an Installment Agreement, or by paying in full.
- If you have a business, keep money in your corporate or LLC account, and not in your personal account. However, never pay personal bills from your corporate or LLC account.
- Keep money in your retirement accounts, as it is very rare for the IRS to levy such an account.
- In the case where one spouse has a tax debt and the other doesn’t, the bank account may be held in the name of the innocent spouse.
For example, a husband owes money to the IRS from unpaid payroll taxes. This debt doesn’t include his wife, who should be the only signer on the household bank account.
Never deposit a husband’s paycheck in his wife’s account. Keep all transactions separate.
Note:Taxes that are the result of a business, such as payroll and sales taxes, generally only affect the spouse involved in the business. The spouse not involved in the company is referred to as the “innocent spouse.”
- Request an Installment Agreement or file an Offer in Compromise. While you are working towards a resolution of your tax issues, the IRS can’t levy your bank account…just be sure not to miss a deadline to provide documents, or your accounts may be depleted!
By submitting a complete, accurate, and well-planned financial statement to the IRS, you can stop a bank levy from happening, negotiate its release, as well as minimize an Offer in Compromise payoff amount or an Installment Agreement payment amount.
Premier Tax & Corporate, Inc., LLC will analyze your case, determine your best course of action, prepare your forms, review your supporting documents, send you a completed package reviewed by a tax attorney and an enrolled agent, and prepare a custom-made, detailed letter of instruction. We will also support you throughout the process by phone and online chat.
Put our decades of IRS experience to work for you and get great results. Click here to get started now, here to send an e-mail inquiry, or phone us at (800) 581-6716/(213) 985-1876 with any questions.