If you have outstanding tax debt that you are ignoring, the IRS can resort to filing a levy on your assets held at financial institutions, such as banks and credit unions. A levy differs from a tax lien. In a bank levy, the IRS seizes your assets to pay off your tax debt, whereas a tax lien claims an asset as security against the tax debt. In other words, the IRS can demand that a financial institution turn over to the IRS the funds in your accounts, up to the amount the IRS shows as due. A bank levy can cripple you financially both personally and professionally, resulting in such things as a total absence of cash flow, bad check charges for any outstanding bank drafts, and heavily damaged credit. The financial institution usually charges a heavy fee to process the levy as well.
What happens during a bank levy? Generally, the IRS will levy your accounts under the following circumstances:
- The IRS sends you Notices for Demand for Payment (“Notice”) for back taxes you owe.
- You ignore these Notices.
- The IRS sends you a Final Notice of Intent to Levy (“Final Notice”), allowing 30 days for a response.
- And you continue to ignore the Final Notice.
Once the levy has been filed, the bank holds your funds for 21 days, providing you time to contest the levy. If you do not respond to the levy, the IRS will not release the levy within the 21-day time frame, and the bank will then forward the funds to the IRS, to be credited toward your liability. The IRS then applies the funds to the most tenured debt, which is, of course, most advantageous to the IRS.
If you owe delinquent taxes, your safest bet is to consult with a tax boutique to forestall collection activity, including potential levies. Law Offices of Christy Lee, P.C., will assess the situation and review your rights with you, then determine the best way to move forward. We may ask an IRS representative for a case review, or we may request a Collection Due Process (“CDP”) hearing with the Office of Appeals. We will complete and file the complicated paperwork to forestall collection activity while working toward a satisfactory resolution to the problem. In some cases, we may bring suit to contest the IRS’s determination of the matter.
If the IRS has already levied your accounts, getting a release of those funds can be difficult. We will assist you in navigating the paperwork necessary to secure your assets, clear your obligations to the IRS, and prevent a recurrence of delinquent tax liability in the future.
As a tax boutique, Law Offices of Christy Lee, P.C., will fight for your rights when you face a bank levy. Our staff are well informed of IRS procedures and the best methods for obtaining a fair and equitable resolution to your tax issues. Don’t let your matter become so dated that there are few remaining options to deal with your situation.