If you share a bank account with your spouse, you probably don’t spend much time thinking about who owns which dollars. In most households, it is the account where income is deposited, and expenses are paid.
However, that sense of normalcy can shift when one spouse owes back taxes. Suddenly, couples are faced with a difficult question: Can the IRS levy a joint bank account if only one spouse owes taxes?
Here is a quick look at what you need to know to keep your finances secure.
What Happens If One Spouse Owes Taxes?
Unfortunately, the IRS can levy a joint bank account even if only one spouse is responsible for the tax debt.
Since both names are on the account, the IRS can treat it as a reachable asset. This means the bank may be required to freeze the account and hold funds up to the amount owed.
However, that does not automatically mean the IRS is entitled to keep every dollar in the account.
Why the IRS Can Freeze a Joint Bank Account
A tax levy allows the IRS to seize property to satisfy a debt. When it comes to joint accounts, the IRS does not distinguish between each spouse’s share. They will send instructions to the bank to:
- Freeze the account
- Hold the funds for a set period
- Release the funds to the IRS if no action is taken
This process can catch non-liable spouses off guard, especially when their income is deposited into the same account.
What Is the 21-Day Rule?
After a levy is issued, the bank must hold the funds for 21 days before sending them to the IRS. During this time, the non-liable spouse can challenge the levy. They need to show that some or all of the funds belong to them.
If the 21-day period has passed and the funds have been sent to the IRS, recovery is still possible. Unfortunately, it will be more complicated.
The non-liable spouse can file a wrongful levy claim. But you still don’t have access to the money. You will need to show detailed financial evidence. It can be a long resolution process. For this reason, you may want the help of an experienced Tennessee tax debt resolution lawyer to handle your case.
What Do You Need to Prove Ownership of Funds?
The IRS recognizes that joint ownership does not always mean equal ownership. In these cases, you need to prove who actually owns the money in the account.
If you want to establish ownership, you must show:
- The source of the income and who earned it
- Deposit history and account activity
- Supporting financial documentation
Pay stubs, bank statements, and employment documentation are important. They can show the origin of the funds.
Protecting Your Joint Bank Account
If you have a shared bank account and one spouse could face potential tax issues, there are a few steps to take. These include:
- Maintaining separate bank accounts for individual income
- Keeping clear and consistent financial records
- Avoiding commingling funds when possible
- Addressing tax liabilities early through payment arrangements or resolution options
These steps can help establish clear ownership. In turn, it can minimize exposure if there is ever any IRS collection activity.
The IRS Can Put a Levy on Joint Bank Accounts
Can the IRS levy a joint bank account if only one spouse owes taxes? The answer is yes. However, the non-liable spouse has options.
However, you need to act right away and have solid documentation to protect your money and interests.
If you are dealing with an IRS levy or want to avoid one, Easter & DeVore, Attorneys at Law, are ready to assist. We can help you discover your options in these situations. Schedule a consultation today.
