Bank Levies

When the levy is on a bank account, the Internal Revenue Code (IRC) provides a 21-day waiting period for complying with the levy. The waiting period is intended to allow you time to contact the IRS and arrange to pay the tax or notify the IRS of errors in the levy.

Generally, IRS levies are delivered via the mail. The date and time of delivery of the levy is the time when the levy is considered to have been made. In the case of a bank levy, funds in the account are frozen as of the date and time the levy is received. Normally, the levy does not affect funds you add to your bank account after the date of the levy.

A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a legal claim against property to secure payment of the tax debt, while a levy actually takes the property to satisfy the tax debt. Any property or right to property that belongs to the taxpayer or on which there is a Federal tax lien can be levied, unless the IRC exempts the property from levy.

The IRS will usually levy only after these three requirements are met:

• The IRS assessed the tax and sent you a Notice and Demand for Payment (a tax bill);
• You neglected or refused to pay the tax; and
• The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy. The IRS may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested. Please note: if the IRS levies your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy.

If you do not pay your taxes (or make arrangements to settle your debt), and the IRS determines that a levy is the next appropriate action, the IRS may levy any property or right to property you own or have an interest in. For instance, the IRS could levy property that is yours, but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions). Or, the IRS could seize and sell property that you hold (such as your car, boat or house).

You can avoid a levy by filing returns on time and paying your taxes when due. If you need more time to file, you can request an extension. If you can’t pay what you owe, you should pay as much as you can and work with the IRS to resolve the remaining balance. The key is to be proactive; so don’t ignore IRS billing notices.

If you do not respond to IRS billing notices and work with the IRS to resolve your tax debt, the IRS may levy your property. Even if you think you do not owe the tax bill, you should give us a call.

If you receive an IRS bill titled Final Notice, Notice of Intent to Levy and Your Right to A Hearing, contact us right away.

How Do I Get a Levy Released?

Contact us immediately to resolve your tax liability and request a levy release. The IRS can also release a levy if it determines that the levy is causing an immediate economic hardship. If the IRS denies your request to release the levy, you may appeal this decision. You may appeal before or after the IRS places a levy on your wages, bank account, or other property. After the levy proceeds have been sent to the IRS, you may file a claim to have them returned to you. You may also appeal the denial by the IRS of your request to have levied property returned to you. For a full explanation of your appeal rights, see Publication 1660, Collection Appeal Rights (PDF).

The IRS is required to release a levy if it determines that:

• You paid the amount you owe,
• The period for collection ended prior to the levy being issued,
• Releasing the levy will help you pay your taxes,
• You enter into an Installment Agreement and the terms of the agreement don’t allow for the levy to continue,
• The levy creates an economic hardship, meaning the IRS has determined the levy prevents you from meeting basic, reasonable living expenses, or
• The value of the property is more than the amount owed and releasing the levy will not hinder our ability to collect the amount owed.

The release of a levy does not mean you don’t have to pay the balance due. You must still make arrangements with the IRS to resolve your tax debt or a levy may be reissued.