Can the IRS levy my bank account?
Yes. If you owe the IRS back taxes and have not entered into an installment agreement or made other arrangements, the IRS can levy your bank accounts.
If you have been levied, contact us today. The tax attorneys and enrolled agents at Gatherwright Freeman can stop IRS bank levies now. We also work on state and local tax levies. Stop your IRS Levy, Ohio Levy, Kentucky Levy Now.
How to Stop an IRS Bank Levy
Contacting the IRS to request a payment plan or hardship status are effective ways to release an IRS bank levy once it has been issued. If the taxpayer can establish an installment agreement to pay the back taxes over time or demonstrate that the bank levy would be unfair due to financial hardship the IRS may release the levied funds in the bank account.
In order to stop a levy, the IRS usually requires taxpayers to provide financial information. Taxpayers should have professional assistance when providing financial information to the IRS to ensure that the taxpayer is providing all the appropriate expenses for consideration and that the IRS is accepting those expenses and processing the information properly. The IRS has a set of allowable expense that it is supposed to accept when determining a taxpayer’s monthly ability to pay but not all IRS personnel are properly trained or play by the rules. There are also conditional expenses IRS personnel are supposed to accept under certain circumstances, yet routinely deny, such as credit cards, dependent care, and student loans. Our staff knows the rules and makes sure they are followed.
When will the IRS levy my bank account?
Before the IRS garnishes your bank account, it will send the taxpayer two separate notices.
1. First Notice: The IRS will send the taxpayer a tax bill called a Notice and Demand for Payment.
2. Second Notice: If the tax remains unpaid, the IRS will send the taxpayer a second notice called a Final Notice of Intent to Levy and Notice of Your Right to A Hearing. Once the taxpayer receives this letter, the IRS may begin levying bank accounts 30 days after the date of the letter.
Local governments such as Ohio, Kentucky, and Cincinnati also have their own series of notices. Local governments may levy soon after sending out the notices, or they may wait years to levy and take the taxpayer completely by surprise.
How much money can the IRS levy from my bank account?
The IRS will send the taxpayer’s bank a Notice of Levy Form 668–A(C)DO listing a dollar amount of unpaid taxes owed by the taxpayer.
The bank is required to freeze any money in the account up to the amount of the unpaid taxes as of the date it receives the Notice of Levy. The bank must hold these funds for a 21-day waiting period and then forward the funds to the IRS.
Bank levies are one-time levies and apply only to the funds in the account the day the Notice of Levy is received. For example, if the taxpayer has $100 in his bank account the day the Notice of Levy is received and deposits another $500 the day after it is received, the bank should only freeze $100 and should allow the taxpayer access to the additional $500.
Which bank accounts can the IRS levy?
Typically, the IRS can obtain funds in any account containing the identifying social security number or employer tax identification number (EIN) listed on the Notice of Levy Form 668–A(C)DO.
For example, if a taxpayer has a joint account with an aging parent, the IRS can take all the funds in the joint account even if the funds belong to the parent. This money can be refunded if the IRS is satisfied the funds did not belong to the taxpayer, but best practice is not to share accounts with other parties if you owe back taxes.
If a taxpayer has an individual bank account under his or her social security number and a business bank account under the business employer identification number (EIN), the levy attaches only to the particular taxpayer named on the Notice of Levy Form 668–A(C)DO.
For example, Bob Smith owes the IRS $500 in individual income taxes. He and related entities have three bank accounts at Omega Bank as follows–
1. $100 in account held by Bob Smith under his social security number
2. $2,000 in account held by Best Concrete Inc. under its EIN, Bob Smith President
3. $5,000 in account held by Better Built Driveways, LLC under its EIN, Bob Smith Manager
If the IRS sends a Notice of Levy to Omega Bank for $500 owed by Bob Smith, Omega Bank should only freeze the $100 in Bob’s personal account.
Notwithstanding, taxpayers should not commingle funds into separate accounts to avoid IRS garnishment as this could be construed as tax evasion.
If you need assistance, the tax attorneys and enrolled agents at Gatherwright Freeman can stop your bank levy now. Stop your IRS Levy, Ohio Levy, Kentucky Levy Now.