IRS Bank Levy
If you are delinquent in paying your taxes, the IRS can seek a levy on your bank account. An IRS bank levy effectively freezes the funds in your account for seizure.
IRS Bank Levy
Let’s assume you’ve missed paying taxes for a few years. The IRS figures it out and starts sending you nasty notices. Unfortunately, you’ve moved and the IRS is sending them to your old address. So, how will you find out what is going on? When an IRS bank levy is put on your bank account.
The IRS is given broad authority to hunt down delinquent taxes. This authority, of course, has given rise to the numerous horror stories you’ve heard about the IRS. The IRS bank levy is a brutal tactic because it immediately acts as a freeze on your account. Think about that. One day, you simply cannot withdraw money from your bank account. How would that impact you? The IRS bets it will serve to get you in touch with them very, very quickly.
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So, how does the IRS work with banks? Here’s one of the guiding memos served by the IRS on banks:
“The Internal Revenue Service would like the banking community to be aware of the current laws governing disclosure of bank account information to Internal Revenue Service representatives upon service of a levy.
Title 26 United States Code Section 6333 of the Internal Revenue Code (IRC) authorizes the Service to examine any books or records pertaining to property or a right to property subject to a levy.1 The Treasury Department interprets this section to mean that, at a minimum, the Service would be entitled to a bank record indicating a levied account’s balance on the date the levy was served.
When a levy is made or about to be made, the bank should provide balance information for all accounts in which the taxpayer has a right to property, rather than demanding that a summons be issued. Honoring a request for information at the time the levy is served protects taxpayer privacy rights because the rights afforded the Internal Revenue Service pursuant to § 6333 are far less expansive than those provided by the general summons authority of § 7602. Providing information in response to or immediately before levy service saves both the financial institution and the IRS the time and expense of dealing with summonses.
If the requested information is provided at the time of levy service and the records show that the levied account contains a minimal amount of funds, the IRS employee may decide not to serve the levy, providing further savings to the financial institution by avoiding the costs of contacting the customer, returning NSF checks, and processing the levy.
Regardless of whether the bank provides the account balance information when requested or in response to a summons, the levy attaches to the funds in the bank account at the time the levy is served. Upon service of a levy by an IRS employee, the bank should immediately freeze the funds in all bank accounts containing funds to which the taxpayer is entitled. Claims to funds not yet processed against the accounts, such as checks, account charges or loan payments owed to the bank, may not be honored until the taxpayer deposits additional funds in the account or IRS releases the levy.”
Scary stuff, eh? If an IRS bank levy is put on your account, there is little choice but to immediately find a tax professional to assist you. An IRS bank levy is the stuff of nasty tax legend.
If you get hit by one, act fast to keep all of your money from being drained from the account. Once the IRS has it, you will not get it back.
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