You just got a letter from the IRS saying it has contacted your bank to take money from your account. Or maybe you went in to do some banking and the bank told you that your account has been frozen by the IRS. What has happened?
The IRS has put a levy on your bank account. [Click here to learn more about the basics of a bank levy]. If the IRS hasn’t received payment from you or has not heard from you about making payment arrangements for overdue taxes owed, its next step is to levy your accounts. The IRS sends a letter to your bank, with a copy to you, notifying the bank that you owe tax and informing the bank it must hold your money for 21 days. Then, after the 21 days go by, it must release the money directly to the IRS.
What are the Options for IRS Bank Levy Relief?
- If possible, pay the amount due with other available funds outside of your bank account.
- If you have money at other banks or financial institutions that will cover the amount you owe, you can just let the IRS get the money in the levied bank to pay off your tax debt.
- If you can’t pay and can’t afford to have the IRS take the money from your account, you should call the IRS at the number on the top right corner of the Notice of Levy. Please know that there is nothing your bank can do to help with this. They must follow the IRS rules and cannot release your money without IRS approval.
- If you think the IRS has made a mistake in taking levy action (which rarely happens, but there are some circumstances where it does), you still should contact the IRS by phone right away. In addition, you can file a claim for a refund of any bank fees that are incurred due to the mistaken levy (i.e. overdraft charges). This claim must be made within one year after the levy. But, first, you need to correct the levy by getting in touch with the IRS.
Wondering how long a bank levy lasts? Learn more about bank levies.
What to Expect When Calling the IRS for a Levy Issue?
The fastest way to get in touch with the IRS to release or help with the bank levy is to call the 1-800 number that’s in the top right corner of the Notice of Levy. You can always write to the IRS as well; however, there is no certainty of how long it will take the IRS to process your request.
When calling, you can expect to wait on hold anywhere from 15 to 45 minutes (or more). This can be frustrating and time consuming. This is where Lucent Tax Relief can help by efficiently taking care of this for you.
The #1 thing the IRS wants to know from you during your call is why they should release the funds back to you rather than paying themselves from secured funds. If you have a financial hardship, the IRS will release the funds. A couple of examples of a hardship would be: You don’t have enough income to pay your monthly expenses. You are at immediate risk of losing your home if you don’t have funds to pay the mortgage or rent. We have had an instance where the levy was done right before Christmas and the IRS released the levy due to the holiday season and the taxpayer wouldn’t have had funds for buying gifts.
The decision of whether to grant a hardship release is in the hands of the IRS agent who answers your call. Other than showing hard evidence that your income is less than your expenses and without the amount in the bank to pay for your expenses, you are at the mercy of the agent you talk with.
You may be required to set up a payment arrangement with the IRS. If you owe less than $50,000, you can do a direct debt installment agreement. If you owe over that amount, you will need to provide financial information supporting your requested monthly payment. Otherwise, you may also be eligible for an Offer in Compromise. You can find more information on tax debt forgiveness here.
As with all IRS issues, the answer to “What to Do” when receiving a bank levy is to communicate with the IRS as soon as possible. If you need or want help dealing with this, we are happy to help get a plan in place to resolve your back tax debt.