Receiving IRS notices from the Internal Revenue Service that they intend to issue an IRS bank levy can be confusing or frightening. But a levy notice is just one step in the IRS liability collection process, and you still have time to act. An experienced tax lawyer can often get IRS bank levies stopped or reduced. If the IRS tells you they intend to issue a bank account levy, a licensed tax professional can be a crucial asset as you deal with the IRS and work to resolve your tax problem, so they don’t seize funds or other personal property.
What Are IRS Bank Levies?
Internal Revenue code 5.11.4 permits the IRS to legally seize money from your bank account or other financial account to satisfy unpaid back taxes. If there are insufficient funds in your financial account to cover the back taxes, the IRS may garnish wages or seize other personal property to make up the difference.
The funds in your IRS-levied bank account will be frozen, preventing you from accessing your bank account funds. It’s much less complicated to prevent IRS bank levies from going into effect before the IRS takes your money than it is to remove a levy after the fact. You’ll have much better options if you act quickly to get a tax debt lawyer involved early in the levy process.
Navigating the process is much easier before the bank processes the levies on your bank accounts, so it is crucial to contact an experienced tax debt attorney as soon as you receive a levy notice from the IRS.
How Is an IRS Bank Levy Different from a Lien?
Both levies and liens are possible penalties for a taxpayer who has an outstanding tax liability from back taxes that they have refused to pay or negotiate. They may both be part of the process for some taxpayers.
An IRS levy permits the legal seizure of assets to satisfy taxes owed, while a lien establishes a priority claim without actually taking it, even if another creditor has a court order allowing them to claim money from your bank account.
An IRS lien is, effectively, a notification to your creditors that any property or money involved will be tied up with the IRS, making it much less likely that you’ll have access to bank services like loans.
What Happens When the IRS Issues a Bank Levy?
Before the IRS bank levy occurs, the IRS will generally take several steps to resolve the back taxes voluntarily. Bank levies are often preventable with the help of a good tax debt lawyer.
Notice and Demand for Payment
The IRS Notice and Demand for Payment is essentially a bill for unpaid taxes. It is the first step to notify you that the taxes owed need to be paid.
The letter will include the amount owed, which tax year(s) are late, and what action you need to take to resolve the issue and prevent your accounts from being levied.
Final Notice of Intent to Levy
If, after receiving your initial letter about your delinquent tax balance, you don’t pay the bill or arrange an installment agreement with the IRS, you will receive a Final Notice of Intent to Levy at least 30 days before the levy begins. This letter will, again, include the amount owed and which tax year(s) are involved, and when they will seize funds in your accounts.
If you can’t pay the total amount you owe, you still have the option of making a payment arrangement or requesting an appeal in tax court to stop the levy. Instructions for both options should be included in the letter.
The Intent to Levy letter is also informing you that the IRS will contact your bank, informing them of your IRS levies and collecting information on your bank accounts, accounts receivables, state tax refunds, or any other financial account or personal property that they might levy to satisfy the tax liability.
This may also cause problems with your United States Passport. Once the IRS files a Notice of Intent, you won’t be able to get a passport. In some cases, the U.S. Department of State may revoke your passport to prevent international travel.
Notice of Federal Tax Lien
A Notice of Federal Tax Lien publicly informs your creditors that the IRS will be exploring your current and future assets to resolve your tax liability. It may get included in your credit report.
This sets your debt with the IRS at a higher priority for collection than other debts. So if any other debt collector is looking at filing a lien against you, they will have to wait until the IRS debt is satisfied.
An IRS bank levy will interfere with your ability to buy and sell any property because it makes getting credit extremely difficult. The IRS can also levy any state tax refunds that are coming your way and/or garnish wages.
Notice of Third-Party Contact
The IRS must notify you before contacting any third party about your tax levy. The document will specify the period (at least 45 days but less than one year) when the IRS can contact third parties about your assets.
IRS employees are not allowed to contact third parties outside the specified time window.
How Can a Tax Debt Attorney help?
There are two ways to contest IRS levies. A tax debt attorney can help you decide which is best for your situation.
You can contest an IRS levy before, during, or after the levy occurs, but the sooner you get a tax debt lawyer involved, the more options they will have to help you fight any levies you are facing.
If you are actively negotiating with the IRS to resolve your tax debt, they won’t proceed with a bank levy. A tax debt lawyer can make sure you’re going through the proper channels to protect your assets from levies while you resolve the situation.
Determine if the IRS Levy is Valid
Your tax debt attorney can help you assess if the IRS has filed a tax levy in error. Several conditions might invalidate the tax levy, from violations of mandatory waiting periods to the seizure of exempt property.
Your lawyer can appeal erroneous levies through the Collections Appeal Program and tax court.
Negotiate an Installment or Settlement Agreement
A tax professional can help you negotiate terms for repaying your tax liability. Often, an attorney can negotiate with the IRS to reduce the total amount owed to much less than what the IRS had levied.
A tax debt lawyer can prepare an Offer in Compromise or help demonstrate economic hardship to reduce the total amount owed. There are very specific requirements for these options, but your lawyer can help you determine if you qualify.
File a Request for a Collection Due Process Hearing
If you hire a tax debt attorney when you get the first notice, you can file for an appeal. You have 30 days to file a request for a hearing, and they will pause any IRS levies until the CDP hearing is complete.
There are very specific conditions for appeals to stop a levy at a CDP Hearing, so you will need to consult with an attorney before filing to avoid problems.
Enter the Collections Appeal Program
There is a wider range of reasons to file an appeal through the Collections Appeal Program. However, if you lose the appeal, you waive your right to any further appeals. This means that it’s crucial that you present the best possible case on your first appeal, so you need a good tax debt attorney on your side.
Stop An IRS Levy on Your Bank Account
Even after they have levied your bank account, a good tax debt lawyer may be able to stop it, but the process becomes more complicated.
The IRS is subject to a 21-day waiting period on all IRS bank levies. There are a very limited number of reasons to stop a bank levy that has already happened to your bank account, but an experienced tax debt attorney may be able to help.
However, once the IRS levies your bank account, your options are drastically reduced. The IRS levy will freeze your bank account. Your best option is to find and hire an attorney as soon as possible to minimize the impact an IRS bank levy can have on your life.
Should I Still Talk to the IRS If I Hire a Tax Debt Lawyer?
Once you hire a tax debt attorney, the IRS can no longer get in touch with you, and you should not call the IRS directly. All communication must go through your attorney. If a revenue officer from the IRS contacts you, you should refer them to your attorney.
If you receive any notices or letters from the IRS, you should give them to your attorney immediately. The IRS will not initiate contact with you by phone or email.
At Seattle Legal Service, PLLC, our experienced tax debt attorneys can help you navigate this process to get your issues with the IRS resolved and get the levy released.