IRS Bank Levies: When “Yours” Becomes “Theirs”

When you were a kid, you probably had a piggy bank. As you filled it with your treasured coins, you understood that, once the piggy swallowed your hard-earned allowance, the money was safe inside until you decided to take it out and spend it.

Ah, the naivete of youth.

As a tax-paying adult, it’s important to understand the concept of a bank levy. Think of it this way: the IRS snatches up your piggy bank and all its funds to pay for taxes you owe. And, once the IRS gets ahold of your funds, you will not get them back.

What is an IRS bank levy?

The IRS has the power to collect past due taxes with a collection process known as a levy. A levy can be placed on any property (or right to property, like your retirement accounts) to which you are entitled. Specifically, a bank levy is when the IRS seizes your bank account and uses that money to satisfy all or some of your debt. Once in place, the bank has 21 days to comply with a bank levy and send your money to the IRS.

When is my bank account in danger of being levied?

There are three things that happen before the IRS places a levy on your bank account for unpaid taxes.

First, you will receive a “Notice and Demand for Payment” – usually in the form of a CP501 Notice. This is just a fancy name for a tax bill detailing the amount you owe the IRS. When you receive your bill, it’s important to carefully review it and make sure that the amount you are being assessed is correct. This is a great time to consult a tax attorney, especially if you disagree with the amount you are being billed.

After the Notice is sent, a taxpayer has several payment options to choose from to resolve their tax debt. If the tax debt goes unresolved, either because you can’t afford to pay the amount due, disagree with the tax amount you are being assessed, or some other reason, the IRS will proceed to the next step in the collections process.

After sending the CP501 Notice, the IRS will send a CP504 Notice called a Notice of intent to seize (levy) your property or rights to property.  If you do not respond to the CP504 Notice, the final step before your account is levied is the issuance of an IRS Letter 1058 or LT11, Final Notice – Notice of Intent to Levy and Notice of Your Rights to a Hearing.  These notices tell you two things:

  • You’re running out of time to resolve your tax debt and, unless you act immediately, a levy will go into effect; and
  • If you disagree with the amount you are being billed, you have the right to request a Collection Due Process Hearing or Equivalent Hearing by submitting Form 12153

Again, it’s important to act quickly as soon as you receive the first notice: hiding under the proverbial covers won’t make your debt go away. In fact, procrastinating on getting your tax debt resolved can lead to an even bigger tax debt because of penalties, interest, and other fees that will begin to accumulate.

How can I stop an IRS bank levy?

To stop an IRS bank levy, the most obvious (and usually most difficult) course of action is to pay your tax bill in full. If you can’t afford to pay the total amount you owe, you can request an installment agreement (i.e., a payment plan) to divide the total into smaller, more manageable payments.

If you can’t afford to pay your tax debt, or you disagree with the amount you are being billed, contacting an experienced tax lawyer is another way to protect your assets from being levied. A tax attorney can evaluate the amount of tax you were assessed and check to make sure it’s accurate, and if not, help you appeal the Notice at an administrative hearing. A lawyer who is familiar with the IRS can also help explain each step of the collections process to you and advise you on alternative steps you can take to keep your tax debt from ruining your finances and your future.

Protect your bank account with the Law Offices of Robert V. Boeshaar

If you owe money to the IRS, the Law Offices of Robert V. Boeshaar can help you protect your assets from seizure. Schedule a free phone consultation online or call us at (206) 207-0413 to find out how we may be able to help you.

Written by Robert V. Boeshaar

Robert V. Boeshaar

Robert V. Boeshaar is a Seattle tax attorney committed to helping individuals and small businesses who are facing problems with the IRS. He believes in using his experience to serve others and to make a difference in their lives.