What do I do if I’m hit with a IRS bank levy against my bank account?
It never fails. Our office gets a panicked phone call maybe once a month from a taxpayer who went to the ATM machine to make a withdrawal or had a whole slew of checks bounce because the IRS seized their bank account. It always seems to happen at the worst times but….is there really ever a good time for the IRS to take all the money you have in the bank? Not really if you ask me. I’m IRS Attorney Darrin Mish and I’ve been representing clients before the IRS since 1999.
It’s a common misperception that when the IRS seizes your bank account that they have placed a “freeze” on the account. This isn’t really accurate. The account is not frozen. The IRS merely has the right to the money in the account at the time the levy was served (meaning at the time the account was seized). This typically creates a situation where you as the account holder are overdrawn and so it takes a deposit to get the account moving again. The IRS must wait 21 days from the date of the seizure before the bank can turn it over. This 21 days is supposed to allow you time to contest the legality of the IRS bank levy.
The IRS must have issued a Final Notice of Intent to Levy and sent it to the taxpayer via Certified Mail at least 30 days prior to the bank levy. This almost always happens and I rarely see the IRS break the law by seizing bank accounts without sending the Final Notice of Intent to Levy.
When you get word that your bank account has been levied, ask the bank for a copy of the levy notice. It’s always shocking to hear that the IRS has taken this rather drastic step but remember, they’re only entitled to the amount of money in the bank account at the time of the levy. If it’s three days before payday and all you have in the bank is $100, then that’s all they’re getting. So that would be good news. If they somehow guessed right and hit your bank account right on payday, that’s terrible and probably you’re going to need to scramble to see what you can to get it back.
There are really two options in this situation. You can call the IRS at the phone number on the bank levy notice that you got from the bank and plead your case. If the money in your account belonged to someone else (and you can prove that) or the money was all derived from a source of income that is completely exempt like your new spouse’s paycheck (that wasn’t part of the original problem) than you might be able to convince them to release it.
Another possible situation would be where you could convince them that it would create an economic hardship if they kept the money. An economic hardship is created when you cannot pay for life’s basic necessities like food, clothing, shelter and medical care. It’s tough to prove but if you can’t feed your kids because they just grabbed your paycheck, you need to let them know.
Lastly, it’s important to know that an IRS bank levy is a one time levy meaning that it’s not continuous. The IRS can’t freeze your account and just take all the money that ever goes into your account. They are entitled to the money in the account 21 days after the levy is served. They are not supposed to do continuous levies meaning they aren’t supposed to file one this week, then another next week and the week after that and so on.
If you have questions about Federal Bank Seizures or really anything pertaining to IRS Problems, please call us to schedule a free consultation at (888) 438-6474.