If you owe taxes to the IRS and do not formalize or propose an agreement to resolve the back taxes, the IRS can levy your bank account. You may have heard of an IRS bank levy when someone states, “the IRS has frozen my bank account!” The article below has been drafted by a Denver tax attorney at The McGuire Law Firm to provide information regarding IRS bank levies. Please feel free to contact The McGuire Law Firm to speak with a tax attorney.
First and foremost, to issue a bank levy, the IRS must have provided you with due process, which consists of a series of notices and finally, a Final Notice of Intent to Levy. If you do not respond to the Final Notice of Intent to Levy within 30 days from the date of the notice by requesting a collection due process hearing, formalizing an agreement or proposing an agreement, you are open to IRS enforcement such as a bank levy. When the IRS issues the levy, they will send the form (Form 668) to your bank (or banks) and your bank is required to hold all monies in the account up and to the levy amount for 21 days and then release the funds to the IRS unless the bank receives a levy release or partial release from the IRS. For example, if you had $10,000 in your bank account and the IRS issued a bank levy in the amount of $8,000, the bank would hold $8,000 for the timeframe stated above. If the IRS issued a bank levy for $15,000, all $10,000 in your account would then be held. Thus, you do have 21 days to attempt to have the bank levy released or partially released.
All of that being said, how do you convince the IRS to release or partially release the bank levy? The IRS may release the bank levy if you establish a formal agreement or can show that the bank levy is creating an economic hardship. In terms of an economic hardship, you may be required to show that you will be unable to pay your mortgage or lease and are at risk of foreclosure or eviction, or you may have to show that you are unable to pay other everyday type living expenses. If the IRS agrees to release the bank levy, a notice will be issued to your bank, and typically the bank will allow you access to your money within the next day, but such issue would need to be discussed with your bank. Some banks will charge you a levy processing fee and of course even if the IRS releases the bank levy, the levy may have caused checks to bounce and often I have seen a bank levy cost a taxpayer $200-$1,000 in bank fees. Thus, the best course of action is to never be in position where the IRS could levy your bank account!
If you have a tax debt or problem with the IRS, or any other tax questions, speak with a Denver tax attorney at The McGuire Law Firm regarding your questions and issues.