In the event that you fail to pay your taxes or go into debt with the IRS, they can seize your finances and assets through what is known as a levy. If the IRS has sent you a Final Notice of Intent to Levy, you have 30 days to appeal the release, or the IRS will begin to levy your assets. .
One of the most common ways the IRS does this is with a bank levy. A bank levy is the process by which the IRS freezes your bank account and eventually seizes your funds to offset, or cover, the money you owe. This can be a terrifying and stressful experience, but with help from professionals, you can get a bank levy release quickly and efficiently.
Bank Levy Release
If you fail to reach an arrangement within the 30 days of notice from the IRS, they will begin to levy your assets. In many cases, this begins with a bank levy. The funds in your bank account will be frozen and set aside by your bank for 21 days. On the 22nd day, the bank will send the frozen funds to the IRS.
It’s extremely important that you take action in this 21-day period and seek out a bank levy release. You can stop tax levy and resolve this by contacting a tax professional or the IRS directly. Getting a bank levy release is difficult but not impossible. Once the 21 day period is over and the IRS has confiscated your funds, it is incredibly difficult to get them back. Don’t wait until the last day to seek out a bank levy release with the help of a tax professional, as working with the IRS can take time.
Note that, while the IRS is enacting a levy of your bank account, you will still be able to access cash and paycheck deposits. This kind of levy will not affect upcoming deposits into your account. Unless your wages are being garnished by the IRS as well, your check and cash deposits will remain untouched by the IRS.
How to Stop an IRS Levy
A bank levy will not come at you out of the blue. It is preceded by four different warnings over the course of close to 3 months. These notices, known as collection notices, follow your IRS Notice of Deficiency and inform you of the balance of your debt, any additional penalties and interest, and tell you how to stop an IRS levy from occurring. If you do not act upon receiving these letters, you will be at risk for an IRS bank levy.
- Notice CP14, Balance Due: The Balance Due Notice your first notice from the IRS. It is like a bill that notifies you of how much you owe the IRS and when the deadline for payment is. It also provides information on how to set up an IRS installment agreement if you cannot afford the total amount due.
- Notice CP-501, Important: If you don’t start to take steps to pay back your debt, you’ll receive this notice 30 days after you receive your Balance Due notice. This reminds you of your outstanding payment plus any additional penalties and interest you’ve incurred for the unpaid tax amount. You have 30 days to respond once you receive the Important notice.
- Notice CP-503, Urgent: Again, if no steps are taken, the IRS follows up with the Urgent notice. Again, you’ll be informed of the due amount and revised interest and penalties. You have 10 days to respond to an Urgent notice.
- Notice CP-504, Refund Levy: Next, the IRS will send the Refund Levy notice. This states that the IRS has begun assessing which assets to levy. Often, a tax lien is enacted along with the Refund Levy notice. This shows creditors that the IRS has an interest in your assets and indicates that they may begin a levy sometime soon.
Final Notice of Intent to Levy
The last of your collections notices is called the Final Notice of Intent to Levy, or LT11. This is the IRS’s notification that, if you do not respond to their collections notices within 30 days, your assets will begin to be levied.
Appeal an IRS Levy
If you cannot pay your debt in full, you may be able to appeal your levy. You may qualify for a bank levy appeal if:
- The IRS has made an error and your debt is paid in full
- You have already began to pay back the IRS through an IRS installment agreement
- You’re in the process of negotiating a partial payment agreement, an IRS offer in compromise, currently not collectible status, or another option available via IRS Fresh Start
- The 10-year statute of limitations on collections for your debt has expired
- The IRS made a mistake in their levy procedure and did not follow it as required
If you do wish to pursue any of these options, it’s best to work with a tax professional. They will know the ins and outs of bank levy release, and may even offer a tax monitoring service to prevent such issues from occurring in the future.
How to Get a Bank Levy Released
If you already have an IRS bank levy in place, it is possible to stop the levy before the 21 days are up and the IRS seizes your finances. If your bank levy has begun, you have just 3 weeks to come to a solution with the IRS, or your assets will be seized. No matter the tactic you wish to pursue, we recommend you work with a tax professional for the best possible outcome.
Pay in Full
Paying in full is your best option for tax debt relief. If you’re being levied, the fastest way to stop your levy is to pay off your debt amount. This can get tricky in the event of a bank levy, as a levy requires your bank to freeze your assets for 21 days. That means you cannot withdraw or transfer any of your funds. If you do have the funds to pay off your levy and your bank has frozen your account, you’ll need to contact the IRS and let them know that you would like to pay in full using the assets in your frozen account. They will immediately release the levy so that you may pay.
Enter an Installment Agreement
An installment agreement is a payment plan with the IRS that allows you to pay off your debt in monthly increments over an extended period of time. An installment agreement is one of the IRS’s go-to ways to prevent or release a levy. In fact, they suggest an installment agreement in your first collection notice.
As long as you continue to pay your payments on time, the IRS will not levy your property while paying through an installment agreement. Once you enter an installment agreement with the IRS, your levy will be released.
Prove Economic Hardship
A levy of your bank account(s) may make it impossible to pay for your basic needs, like housing, electricity, transportation, and food. This is what the IRS considers economic hardship. One way to get an IRS levy release is to prove that you cannot live on the remaining funds in your account. If you do wish to prove economic hardship, the best way to do so is to work with a tax professional. You will have to provide the IRS with a detailed report of financial information.
If you’re successful, your account may be put into Currently Not Collectible status and the IRS will temporarily release your levy. This won’t be a permanent fix—the IRS will review your case every two years and decide if you are in a position to pay back the money you owe.
Bank Levy vs Wage Garnishment
Wage garnishment is another type of levy that the IRS uses to offset taxpayer debt. While a bank levy is the IRS’s method for accessing your current assets, wage garnishment is a method they use to access your future assets.
When the IRS garnishes your wages, they will instruct your employer to defer either a portion or the entirety of your paycheck to them, rather than depositing it into your bank account or giving it to you in the form of a check. Wage garnishment may either be used on its own or in tandem with bank levy or another type of IRS levy.
Just like a bank levy, wage garnishment can be either appealed or released using one of the tactics above.
Get Help Releasing a Bank Levy from Community Tax
An IRS tax levy release doesn’t have to be the end. Community Tax isn’t just a tax preparation service. We can assist you in resolving your tax levy issues with the IRS. Our professionals are here to walk you through every step of your IRS levy release letter and every other part of the release process. Don’t let the IRS create further financial hardship for you and your family. Give Community Tax a call as soon as you receive a notice of levy from the IRS. IRS levy help is just a call or click away, contact Community Tax today.