What is a Bank Levy

A Bank Levy is used by the "enforced collections" department to collect when back taxes are owed. Both the IRS and State Taxing agencies use levies. Bank levies are "one time" events. Monies that are in the account at the time that the bank receives the levy notice are seized. The bank holds the funds for 21 days until they send the funds to the IRS. State agencies have different (typically shorter) holding periods.

A bank levy involves all or part of the assets in your bank account being seized. When the levy is issued the account is frozen. Funds are held in suspension then transferred to the tax authority if the basis for the levy is unpaid taxes or other tax debt.

A bank levy is the IRS or other tax authority's way of trying to force taxpayers to repay tax debt. The IRS may initiate the process by sending a letter to the taxpayer stating taxes are owed. If the taxpayer refuses to pay the debt or doesn't respond to the requests with a repayment plan or working with them towards repayment, they may result to levying a bank account. This involves freezing the bank account and seizing any and all money in the bank account (up to the total amount that you owe).

Unfortunately, many taxpayers avoid their back tax debt issues until faced with an IRS Bank Levy. An IRS Bank Levy is much more difficult to release than a Wage Levy but it can be released. The bank account can be almost any type of account (e.g. savings, checking, etc.) and while most levy's occur on accounts held in the United States, the IRS (and even other creditors) can sometimes levy accounts held off shore. Once a bank levy is made on your account, any money that is in the account will be seized. If there is not enough money in the account, all money will be removed.

Releasing a Bank Account Levy

The IRS has special rules and requirements for releasing Bank Levies. Some of the guidelines are similar to those for wage levies. In addition, they have a set of specific requirements that must be met before they will release a bank levy.

A bank levy can happen often and may not be a one time event. The IRS or other tax authority may initiate a bank levy as many times as they want to in order to get the taxpayer's attention or get the tax debt paid off.

A few items to note:

• Banks may charge a penalty each time the bank account receives a levy. The amount can vary but could be over $100 for each bank levy.
• Any checks that were written but not cashed before levy is in place will bounce.
• While withdrawals are not allowed on an account with a bank levy, deposits are. This means that if you have a bank levy in place at that time that your employer deposits your paycheck, this money could be seized as well.
• The IRS use this tactic to get a taxpayer's attention.
• Laws may vary from state to state, however, in most cases certain monies in your account may be exempt including child support payments, welfare payments, social security payments, VA benefits, etc.
• If a bank levy has been placed on your account by a creditor, you may have up to 21 days to contest the levy.
• If you receive a bank levy, you should act immediately.

A bank levy can be released during the holding period - but only under certain circumstances. AmeriPride Tax Group can help you.

Contact AmeriPride Tax Group today.