Finding out that the IRS has levied your bank account can be one of the most stressful financial situations you’ll ever face. You might be asking, “How does an IRS bank levy work, and can you stop it?”
Fortunately, an IRS bank levy does not always mean you’ve run out of options. In many cases, you have a short window of time to take action before the money is sent to the IRS.
Here’s what you should know about how the process works and what you may be able to do next.
What Is an IRS Bank Levy?
An IRS bank levy is one way the government collects unpaid federal tax debt. If you’ve fallen behind on your taxes and the issue has not been resolved, the IRS may direct your bank to freeze money in your account to send those funds to the government.
When this happens, you may suddenly find that you cannot access some of the money you were counting on for everyday expenses.
For many taxpayers, the levy does not come out of nowhere. The IRS sends several notices before taking this step. It can be easy to put those letters aside, especially if you’re already feeling overwhelmed by your tax situation.
What Happens After the IRS Issues a Levy?
Once your bank receives the levy, it freezes the amount identified by the IRS. This will include the amount of your unpaid tax debt.
Here’s something many people don’t realize: the bank does not immediately send your money to the IRS.
Your funds are held for 21 days before they are transferred. This waiting period gives you an opportunity to address the situation before the money leaves your account.
Can You Stop an IRS Bank Levy?
Sometimes, yes. Whether you can stop a levy depends on your individual circumstances. In any case, you need to take action right away. The IRS may agree to release a levy if:
- The tax debt has been paid.
- The levy was issued in error.
- Releasing the levy would help facilitate collection of the tax.
- The levy is creating an economic hardship.
- Another resolution has been reached with the IRS.
Since every case has different circumstances, you should not assume there’s nothing you can do. Reaching out to a tax debt lawyer in Knoxville can help you explore your options.
What Should You Do if Your Bank Account Has Been Frozen?
Your first reaction may be panic. But once you’ve had a moment to process what’s happened, you need to focus on the next steps.
If your account has been levied, make sure to:
- Read any IRS notices you’ve received.
- Contact your bank to find out how much money is affected.
- Collect documents related to your taxes and finances.
- Keep track of deadlines.
- Speak with a tax attorney as soon as possible.
The sooner you begin addressing the issue, the more opportunities you may have to resolve it before the levy proceeds.
How a Tax Attorney Can Help
Dealing with the IRS can feel intimidating, especially when your access to money has suddenly been limited. A tax attorney can help you:
- Understand why the levy happened
- Review your situation
- Communicate with the IRS on your behalf
- Determine whether there are options for resolving your tax debt or requesting that the levy be released
When you have someone who can guide you through the process, that can help during this very stressful time.
You Don’t Have to Face an IRS Levy Alone
How does an IRS bank levy work, and can you stop it? You do have a 21-day window before the bank sends the frozen funds to the IRS. This is the time to act fast and get the right legal help to identify solutions you may not know were available.
At DeVore Law, PLLC, we help individuals and businesses facing IRS collection actions. If the IRS has frozen your bank account or you’re concerned that a levy may be on the horizon, we’re here to explain your options. Contact us today to schedule a consultation.
