Can the IRS Take Money Out of My Bank Account?

On: September 14, 2018

You go to the ATM to get some case and are informed there is no money available in your account. You go inside and are informed that the IRS has levied your bank account. Now is the time to move quickly. Request a copy of the IRS levy immediately. You need to make sure that it is the IRS that is levying your account and not some other creditor. If it is the IRS, the money may not have been taken yet. The bank is required to freeze the account and hold the funds in this account for 21 days before sending to the IRS. Be advised that the bank usually charges non-refundable fees under these circumstances.

Now is a good time to consider hiring a tax professional. In this case, a tax attorney who is prepared to advocate in your interest, as opposed to a CPA or Enrolled Agent who may be constrained by their licensing and ethical requirements to the IRS and are better suited to filings, audits and exploratory research.

Bank levies are tough. The IRS throws them around as if they meant nothing. “It’s just a bank levy.” There are three ways to get it released.

1. Prove that the IRS is wrong and you do not owe anything. Often this will require you to file tax returns for years in which you failed to do so and the IRS filed on your behalf a SFR (“Substitute for Return”) return. The IRS is allowed to do this. When they do, they file you as Single or Married Filing Single, base it solely on your income and do not include any expenses/deductions/exemptions that you would normally be allowed take. In other words, get the returns in NOW!!!

2. Prove that you would suffer a hardship if the bank funds are taken. This will require you to submit financials to the IRS. It is best to do this with your tax professional/attorney so as to be able to take advantage of IRS standards for your region, or be able to explain why they should not apply to you. You may also need supporting backup documentation (an eviction notice, utility cutoff notice, etc…). Certain court orders, like child support, also take priority over bank levies.

3. Prove that you live in a zip code subject to a national disaster exception (i.e.: Hurricane Harvey, Irma, etc…

Once you find yourself in this situation, it is wise to continue preparing your financial collection statement. You are now in a tax resolution mode and must address this situation to prevent further levies, wage garnishments and property seizures. The IRS will automatically ask if you can pay your tax liability in full, enter into an installment agreement or enter into some other arrangement. Let your tax professional work with the IRS and you for the tax resolution best suited to your needs and abilities.