A levy is a way for the IRS to force collection of the amount of tax you owe. The IRS can put a levy against anything you own that is held by someone else. This can mean your business accounts receivable, your wages, a state tax refund, and your bank accounts.
How a Bank Levy is Issued
Before issuing a bank levy, the IRS must have sent you a 30-day Notice of Intent to Levy, which is most typically sent by certified mail – the kind you have to actually pick up at the Post Office. Then, after that 30 days runs, the IRS can issue a levy notice on the bank (or credit union). When the IRS does this, the bank must freeze your account. Note that this does not apply to any qualified retirement accounts you have at your bank. You will then have 21 days in which to make payment arrangements or to explain your situation to the IRS. After the 21 days runs, if the IRS doesn’t release the levy, the bank must send any balance in your account to the IRS.
Bank Levy Duration
An IRS levy is not continuous. In other words, each time the IRS wants to take money out of your account, it must issue a new levy. This is different from a wage garnishment, which actually is continuous.
After the bank releases your money to the IRS, you can start using your account again; however, the IRS could simply turn around and do another levy again. Any money you put into your account, which is often times by direct deposit by your employer, will be taken by that next levy.
Removing a Bank Levy
Most often the IRS issues levies once they get impatient after having sent previous notices without having heard from you. They know this will get your attention. If you get notice of a bank levy, you will want to immediately call the IRS at the number on the top of that notice. You will need to explain that having that money taken from you will prevent you to pay your bills and that it will cause you to have a hardship. The IRS may ask that more detailed information be sent to them to prove your hardship.
When you call, you should have your bank’s fax number handy. If the IRS agrees to release the levy, it will do so at the same time as your call by faxing a release to your bank. This is the best-case scenario in this situation; however, you will need to enter into some sort of payment arrangement for the IRS to even consider releasing the levy this soon. The IRS needs to know that releasing the funds will not harm them in any way or affect their ability to get money from you in the future.
We often hear people keeping cash instead of taking the risk of having their bank accounts levied. That is a difficult way to live life in this digital day and age. We believe it is much more predictable and less hassle over time to deal with the IRS and make arrangements with them for payment.