Getting a letter from the IRS can make your stomach drop. If you’re behind on your taxes, you might have a bigger fear: Can the IRS suddenly take the money sitting in my bank account?
A bank levy can be a financial shock. Money you planned to use for rent, groceries, utilities, or other bills can suddenly be at risk of being taken to pay a tax debt. So, does the IRS warn you before a bank levy?
Yes, the IRS must send notices explaining that you owe taxes, that collection action may be coming, and that you have certain rights to challenge or resolve the debt.
Here is what you can do if you’ve received one of those notices.
What Is an IRS Bank Levy?
The IRS uses a bank levy to collect unpaid federal taxes. When the IRS issues a levy against your bank account, your bank will hold the money available in the account.
After the waiting period, the funds are sent to the IRS. This is different from an IRS lien. In those cases, the government makes a legal claim against your property because of an unpaid tax debt.
A levy will take property or money to satisfy the debt. And this can affect your checking or savings account.
Does the IRS Have to Warn You?
Before the IRS can levy your property, it must meet certain notice requirements. The IRS will send a Notice and Demand for Payment after assessing a tax and determining that you owe money. If the balance remains unpaid, the IRS may send additional collection notices.
Before making a levy, the IRS must send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
This gives you an opportunity to request a hearing with the IRS Independent Office of Appeals and challenge the proposed collection action.
At least 30 days before making the levy, the IRS must provide a final notice.
What Do You Do If You Receive a Final Notice?
A Final Notice of Intent to Levy means the IRS intends to take collection action if your tax debt is not resolved. At this point, you still have several options. You could:
- Pay the balance in full
- Set up an installment agreement
- Request an offer in compromise
- Ask whether you qualify for currently-not-collectible status
- Request a collection due process hearing
- Explore other collection alternatives
Not all options will apply. The right option for you depends on your income, assets, expenses, tax debt, and overall financial situation. Whatever option you choose, you need to act before the levy takes place.
What Happens After the IRS Levies Your Bank Account?
A bank levy does not necessarily mean the IRS immediately receives every dollar in your account. When the IRS serves a levy on your bank, the bank freezes a certain amount.
Federal law requires the bank to hold those funds for 21 days before sending them to the IRS. That waiting period can give you some time to resolve the problem.
If you receive a bank levy notice, contact the IRS, your bank, or an experienced tax resolution attorney as soon as possible to see if the levy can be released.
Talk to a Tax Attorney If You Are Facing a Levy
Does the IRS warn you before a bank levy? Yes, you will receive multiple notices. When you get one, you need to act right away.
A bank levy can have an immediate impact on your ability to pay rent, buy groceries, cover utilities, and handle other everyday expenses.
If you’ve received a Final Notice of Intent to Levy, or if the IRS has already levied your bank account, reach out to DeVore Law, PLLC. We can look at your situation and see whether there may be a way to stop or release the levy. Schedule a consultation today.
