What Happens When the IRS Levies Your Bank Account?

A bank account levy can be frightening because it can disrupt money needed for everyday obligations. When federal tax debt remains unresolved, the Internal Revenue Service (IRS) can levy a taxpayer’s bank account to seize funds and satisfy the balance.

An IRS levy is different from a tax lien. A lien is a legal claim against property, while a levy is the actual seizure of property or funds. In most circumstances, before issuing a levy, the IRS must assess the tax, send a demand for payment, and provide a final notice of intent to levy and notice of the right to a hearing at least 30 days before the levy.

Prompt legal attention can address collection concerns. Deborah Brooks & Associates P.C. helps taxpayers address federal tax collection matters and can evaluate whether a levy was properly issued and what options are available.

Deborah Brooks & Associates P.C. is located in Oklahoma City and Lawton and serves residents throughout western Oklahoma. If you’re facing a levy, contact the firm today to discuss your circumstances with an attorney.

How an IRS Bank Levy Affects an Account

When a bank receives an IRS levy, the funds subject to the levy are generally frozen at the date and time the bank receives the notice. The bank normally holds those funds for 21 days before sending them to the IRS, giving the taxpayer time to arrange payment or identify an error. Funds deposited after the levy generally aren’t affected by that particular bank levy.

The levy amount depends on the account balance when the levy is received and the tax liability. A bank levy generally has a one-time effect. If the IRS doesn’t issue a release during the holding period, the bank generally must send the affected funds to the IRS.

Waiting until the end of the 21-day period can leave fewer opportunities to resolve an issue. An IRS levies attorney can review the collection history, notices, account circumstances, and available remedies.

What Taxpayers Can Do After a Levy

Receiving a levy doesn’t necessarily mean that every collection option has been exhausted. The appropriate response depends on why the IRS issued the levy, whether the debt is accurate, the taxpayer’s financial circumstances, and whether the IRS followed required procedures.

Key information to gather includes:

• IRS notices: Collection notices and correspondence related to the tax debt.

• Account records: Bank statements showing the balance and source of funds.

• Payment records: Documents showing payments already made toward the liability.

• Error documentation: Records supporting a claim that the levy was issued improperly.

• Financial records: Current income and living expense records.

The IRS states that it can release a levy after payment, after the collection period expires, after an installment agreement that doesn’t permit the levy to continue, or after an economic hardship determination. The IRS can also release a levy when it will help the taxpayer pay the tax or won’t hinder collection. A taxpayer who believes the IRS made an error can pursue available remedies.

An account might contain another person’s money, or the liability might already be resolved. An experienced IRS levies attorney can examine the records and communicate with the IRS regarding a potential release or other resolution.

When a Levy Creates Financial Hardship

A bank account levy can create immediate problems when you need frozen funds for basic living expenses. The IRS recognizes economic hardship as a circumstance that can support releasing a levy when the collection action prevents a taxpayer from meeting basic, reasonable living expenses. Financial information is generally needed to evaluate hardship.

Hardship concerns should be documented. A taxpayer can gather information about housing, utilities, food, transportation, insurance, income, and other necessary obligations. An IRS levies attorney can help present relevant financial information and determine which collection alternatives fit the circumstances.

Financial hardship doesn’t eliminate the underlying tax debt. A release generally addresses the collection action, while the taxpayer still needs an arrangement or another resolution for the balance.

A joint or shared account can create complications. When another person has signature authority or claims ownership, documentation can become important. Legal counsel can assess whether a wrongful levy issue exists. The IRS has procedures for situations where account funds belong to someone other than the taxpayer.

Why Prompt Legal Assistance Matters

An IRS levy can move quickly from notice to frozen funds, so timing matters. A taxpayer should review the notice, the amount involved, and any ownership issues.

An IRS levies attorney can review your collection history and identify potential ways to challenge, release, or resolve the levy. Legal assistance can involve communicating with the IRS, reviewing records, addressing procedural concerns, or evaluating payment options.

Taxpayers shouldn’t assume a levy takes every dollar deposited now or later. Bank levies generally attach to funds in the account when the bank receives the levy, and a new levy is generally required to reach later funds. Account structure still matters.

Prompt review matters when you need funds for essentials, the liability appears incorrect, or someone else’s money is involved. An IRS levies attorney can help you evaluate your options.

Get Help From an IRS Levies Attorney

An IRS bank levy can put significant pressure on a taxpayer, but it doesn’t necessarily eliminate your options. The IRS provides procedures to request a release and address hardship, errors, payment arrangements, and other collection concerns.

Reviewing notices, account records, tax history, and financial circumstances can help you identify a path forward. Contact Attorney Deborah Brooks today for support.