Does an IRS Bank Account Levy Appear on a Credit Report?

Don't bother trying to ignore a debt to the Internal Revenue Service because the federal government doesn't just give up. If the IRS has levied your bank account, you've already ignored the debt too long. A levy won't appear on your credit record, but it will hurt you financially and can have long-lasting repercussions.

Bank Levy

A bank levy is a debt collection tactic the IRS uses after getting you to pay your debt on your own has failed. The bank levy is a one-shot deal, notes the website JK Harris, meaning the IRS can't levy your account day after day until the debt is settled. What it can do is seize your deposits. Whatever your balance and deposits are on the day of the levy will be confiscated by the IRS. Your bank holds that amount of money for 21 days while ownership of the account is verified, then sends it to the IRS. The IRS won't confiscate more than what you owe.

Credit

A bank levy doesn't hurt your credit report because the action isn't reported to the credit bureaus. You'll be responsible for any debits or checks that bounce due to the levy. The IRS will only refund that money to you if it applied the levy in error. If the levy doesn't clear your debt, the IRS can take further action, such as attaching the debt to your wages and property or garnishing future tax returns.

Liens

If the amount you owe the IRS is significant and the levy didn't clear it, the IRS will come after your paycheck and belongings. This is called placing a lien on your possessions, and liens do affect your credit score. Not only are they reported to the credit bureaus, they are reported to your creditors. A lien placed on your paycheck can remove up to 70 percent of it, says JK Harris. The IRS can even seize Social Security payments and retirement accounts to settle your debt.

You Have Options

You don't have to let it get this far. The IRS is willing to work with anyone who owes back taxes. You can pay your balance in full as soon as you receive the notice in the mail or establish a repayment plan that suits your finances. Anyone interested in doing this can submit an online payment agreement application through the IRS website. (See Resources.) If you're facing financial hardships and can't make a payment, submit an Offer in Compromise. This is a request to reduce the amount you owe to a payment you can handle in your present circumstances. The payment can be made in a lump sum or installments. A $150 application fee applies unless you fall within federal poverty guidelines.