If you’re dealing with unpaid taxes, you might be wondering how far the IRS can go to collect. Can the IRS freeze my bank account? Unfortunately, the answer is yes, the IRS does have that authority.
But it is not an instant or random action. In many cases, it can be avoided or resolved if addressed early. When you know how IRS bank levies work, that can help you protect your finances and know when it is time to take action.
What Does Freezing a Bank Account Mean?
When the IRS freezes a bank account, it is issuing a bank levy. That levy allows the IRS to legally seize funds to pay uncollected federal tax debt.
Once a levy is issued, your bank must restrict access to the funds in your account. However, the IRS does not immediately take your money. In these situations, the bank must hold the funds for 21 days before sending them to the IRS.
That 21-day holding period is important. You can challenge the levy, show financial hardship, or reach a resolution with the IRS that results in the levy being released.
When Can the IRS Levy Your Bank Account?
The IRS cannot levy your bank account at random. They must:
- Assess the tax debt
- Send a notice demanding payment
- Issue a Final Notice of Intent to Levy
- Provide a 30-day window to respond or appeal
After these steps are completed, and no resolution is reached, the IRS can legally issue a bank levy.
How Much Money Can the IRS Take?
When a bank levy is issued, the IRS can seize up to the full amount available in the account at the time of the levy. But this is limited by the balance of the tax debt.
Keep in mind that the levy does not automatically apply to future deposits. However, the IRS can issue additional levies if the underlying tax issue is not resolved. That means repeated disruptions to your finances are possible until the debt is addressed.
What About Joint Bank Accounts?
Joint bank accounts can also be levied. Yes, if your name is on the account and some or all of the funds belong to another person, such as a spouse or business partner, the IRS may freeze it.
The non-liable account holder may be able to recover their portion. These situations require filing a claim and can take time.
IRS levies can affect entire households, not just the person who owes the tax.
Do Bank Account Freezes Happen Without Warning?
No. The IRS must send advance notices before issuing a levy.
However, many taxpayers overlook or dismiss the notices as routine correspondence. For this reason, it is important to open and read every letter. These collection letters escalate gradually. It can be easy to underestimate their importance until enforcement action occurs.
If you are receiving IRS notices with the words “intent to levy” or “collection action,” it is a strong sign that time is running out.
Can a Bank Levy Be Stopped or Released?
An IRS bank levy is not always permanent. In many cases, it can be stopped before funds are taken or released after a resolution is reached. Some options include:
- Paying the balance in full
- Entering into an installment agreement
- Submitting an Offer in Compromise
- Requesting Currently Not Collectible (CNC) status
- Demonstrating financial hardship
If the IRS agrees to a payment arrangement or determines that the levy creates undue hardship, it may release the levy.
What Should You Do If Your Bank Account Is Frozen?
If your account has been frozen due to an IRS levy, you need to act right away. The longer the levy remains in place, the harder it becomes to recover the funds.
Contacting the IRS or working with a Tennessee tax debt resolution lawyer can help you understand your options. They will assist you in taking the appropriate steps to protect your income and accounts.
Ignoring the situation never improves the outcome. Once the funds are transferred to the IRS, resolving the issue becomes more complicated.
Don’t Ignore Your Tax Debt
Can the IRS freeze my bank account? The answer is yes. In most cases, it is usually the final step in a longer collection process. Taxpayers have many options to prevent a levy or resolve it.
If you are dealing with unpaid taxes or receiving IRS collection notices, reach out to Easter & DeVore, Attorneys at Law. Contact us today to schedule a consultation to discuss your situation.
