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How to Remove an IRS Bank Levy from Your Account

March 21, 2024 Uncategorized

How to Remove an IRS Bank Levy from Your Account

Getting an IRS bank levy can be scary. It means the IRS has seized the money in your bank account to pay your back taxes. But don’t panic! There are ways to get the levy removed and regain access to your funds.

This article will explain what an IRS bank levy is, when the IRS uses them, and most importantly, the steps you can take to get the levy released. I’ll share info based on my own experience dealing with tax issues, as well as tips from IRS experts. My goal is to empower you with knowledge so you can take action to resolve this situation.

What is an IRS Bank Levy?

A bank levy is when the IRS legally seizes the funds in your bank account to cover unpaid back taxes. They do this by sending a notice to your bank, ordering them to hand over the money in your account up to the amount you owe.

Once the levy is processed by your bank, you can no longer access or withdraw the seized funds. The IRS will then take the levied money and apply it towards your tax debt.

When Does the IRS Use Bank Levies?

The IRS won’t just show up out of the blue and levy your bank account. There is a process they follow before taking this serious enforcement action.

First, after you file your tax return, the IRS will send you a bill for any taxes owed. If you don’t pay, they’ll send another notice demanding payment. At this point, you should contact the IRS to make payment arrangements or file an appeal.

If you still take no action, the IRS will issue a Final Notice of Intent to Levy. This gives you 30 days to pay in full, begin a payment plan, or request a Collection Due Process hearing to appeal the proposed levy.

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2024-03-21
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After 30 days passes, the IRS can legally levy your bank account. They do this by sending a notice to your bank with instructions to seize funds.

How the Bank Levy Process Works

Here are the basic steps of how an IRS bank levy works:

  1. IRS sends a levy notice to your bank ordering them to seize funds
  2. Bank receives notice and freezes the account, not allowing withdrawals
  3. 21 days after receiving the notice, bank sends IRS the levied money
  4. IRS applies funds seized towards your unpaid tax debt

So once the bank gets the levy notice, your access to that money is gone. You have 21 days before the bank actually sends the money to the IRS. This brief window gives you a chance to take action to release the levy.

Getting an IRS Bank Levy Released

Now let’s get into how you can get the IRS to release a bank levy and unfreeze your account. The key is acting quickly and knowing the proper procedures.

Negotiate with the IRS

Contact the IRS immediately and request that they release the levy. Be prepared to make payment arrangements to avoid future levies.

Options include:

  • Full payment plan – Pay back taxes owed over 6 years
  • Partial payment plan – Pay a lump sum upfront, then smaller payments over 6 years
  • Offer in Compromise – Settle tax debt for less than owed
  • Currently Not Collectible – Pause payments due to financial hardship

The IRS wants to collect what you owe, so they’ll often release a levy in exchange for a payment agreement. But you need to act fast, before the 21 days is up and bank sends payment.

Request Collection Due Process Hearing

You can request a CDP hearing with the IRS Office of Appeals to review and dispute the proposed levy. Submit Form 12153 to request a CDP hearing within 30 days of receiving an IRS levy notice.

This will halt IRS collection efforts, including the bank levy, while your hearing is pending. The Appeals officer may agree to release the levy if you can show it’s causing undue hardship.

Prove Financial Hardship

If the levy prevents you from paying necessary living expenses like rent and medical bills, the IRS may release it due to economic hardship. Provide documentation like bank statements, bills, rent receipts, etc.

The IRS may also agree to temporarily classify your account as Currently Not Collectible until your financial situation improves.

Claim Tax Identity Theft

If the bank levy stems from tax debt that is not actually yours, you may be a victim of tax ID theft. File an ID Theft Affidavit (Form 14039) and the IRS should investigate and release the fraudulent levy.

Recovering Levied Funds from the IRS

If you weren’t able to get the levy stopped in time, and the bank sent your money to the IRS, you may still be able to get some or all of it returned by taking the following actions:

  • Wrongful Levy Claim – File Form 8546 if you believe the levy was improper or funds taken belonged to someone else.
  • Civil Action – You can file a civil lawsuit against the IRS to recover levied funds in U.S. District Court.
  • Taxpayer Advocate – Ask for help from the Taxpayer Advocate Service if the levy is causing economic hardship.

Avoiding IRS Bank Levies

Now that you understand how to remove an IRS bank levy, let’s discuss some tips to avoid getting one in the first place:

  • Pay back taxes owed – If you have outstanding tax debt, take steps to pay it or make payment arrangements.
  • Respond to IRS notices – If you get an IRS bill or notice demanding payment, don’t ignore it. Follow the instructions to resolve the issue.
  • Request an extension – If you need more time to prepare or file a tax return, submit Form 4868 to get an extension and avoid penalties.
  • Set up a payment plan – The IRS will usually release a levy if you agree to a monthly payment plan for taxes owed.
  • Keep current on payments – If you have an existing IRS payment plan, be sure to make all payments on time to prevent levy action.

Dealing with the IRS and resolving tax problems can seem intimidating. But knowledge is power. Now that you understand the bank levy process and how to remove one, you can take control of your situation. The key is acting quickly to assert your rights and negotiate with the IRS. They want to collect what you owe, so if you contact them and demonstrate good faith, they will often release a levy.

With some perseverance and the help of tax experts if needed, you can get through this difficult situation. Don’t be afraid to ask for assistance from the Taxpayer Advocate Service as well if you’re experiencing hardship. Wishing you the very best in getting your bank levy removed and tax problems resolved!

References

IRS. “Topic Number 653 – IRS Notices and Bills, Penalties and Interest Charges.” https://www.irs.gov/taxtopics/tc653

IRS. “Topic Number 204 – Bank Levy.” https://www.irs.gov/taxtopics/tc204

IRS. “Form 12153, Request for a Collection Due Process or Equivalent Hearing.” https://www.irs.gov/pub/irs-pdf/f12153.pdf

IRS. “Form 8546, Claim for Reimbursement of Bank Charges.” https://www.irs.gov/pub/irs-pdf/f8546.pdf

Cornell Law School. “26 U.S. Code § 6343 – Authority to release levy and return property.” https://www.law.cornell.edu/uscode/text/26/6343

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