What to Know About an IRS Bank Levy

On: August 7, 2020

If you fail to pay your taxes, avoid paying them, or make a long-term mistake on your tax filings, the IRS can demand payment. In some cases, the IRS will respond with action like tax liens or wage garnishments, and other times they will initiate “levies.”

The are several kinds of IRS levies, one of the most common is called a “Bank Levy.” And a Bank Levy occurs when the IRS freezes your bank account to cover a tax debt. After the IRS has frozen your bank account, you have a period of 21 days to pay off your debts to them before they force the bank to hand over your funds.

What to Do About a Bank Levy

Before initiating a bank levy, the IRS will send you a “Demand of Payment.” These kinds of notices are not to be ignored. If one is sent to you, and you need help dealing with the IRS, do not hesitate to contact an experienced tax attorney.

Once the IRS has initiated a bank levy there against you, there are still steps you can take to protect yourself and have the levy removed.

What Income Can Be Levied?

The first thing to understand is that the IRS cannot levy several types of deposits. These include:

• Social Security Income: Income from social security is generally save from levies. This is an approach that is meant to help the elderly who may not have any other means of financial survival.
• Supplemental Security Income: Typically, supplemental security income can not be removed from your account during an IRS bank levy.
• Veteran’s Benefits: Financial benefits paid to veterans are usually safe from any kind of seizure during IRS bank levies.

One of the difficulties with bank levies is that many people have “mixed accounts.” A mixed account is simply a bank account where someone stores multiple sources of income. In many cases, this is a perfectly acceptable practice. But, when dealing with bank levies, it can be a problem to have, for example, your social security money mixed in with other kinds of income. It is your responsibility, or the responsibility of your tax attorney, to work with your bank to determine what income is and is not protected from a seizure during an IRS bank levy.

How to Respond to an IRS Bank Levy

One of the most important things during a bank levy, or during any type of action from the IRS, is to act quickly. If you move quickly and either communicate with the IRS, you are more likely to strike up a deal and avoid serious actions like a seizure of your money or property. If your bank levy has already occurred, you should begin making arrangements to pay off your debts as creditors are allowed to continue drawing funds from the account until the debt is paid.

In these cases, you should always make sure to call Leading Tax Group and don’t attempt to lift a levy or fight the IRS yourself!