The Internal Revenue Service can seize any of your property, including automobiles, personal property and your bank accounts, to pay your back tax debts. A bank levy on your checking account can grind your finances to a halt, causing checks to bounce and severe damage to your credit score. If you have received a notice of an impending bank levy, it's important to become proactive and make arraignments to pay your tax debt.
What is a Bank Levy?
A bank levy is a hold the Internal Revenue Service may place on any bank account you have in your name. This includes your checking account. The IRS may only levy your bank accounts to settle your delinquent federal tax debt. A levy is different from a lien because a lien only places a claim on your property, while a levy actually takes it out of your possession. Unfortunately, it is legal for the IRS to levy your bank accounts if you owe back taxes.
Bank Levy Procedures
Your bank and the IRS are required to inform you in writing of the impending bank levy, though you will not be allowed to withdraw money from the account once the written notice is issued. From the moment the bank receives the notice from the IRS, your account is effectively frozen. You have 21 days from the receipt of the written notice to prevent the bank levy.
How Much Money May Be Seized
The Internal Revenue Service can completely empty your checking and other bank accounts in an attempt to settle your tax debt. According to the IRS, banks usually charge fees to service a bank levy, though they may not reduce the amount given to the IRS to satisfy your debt. This means that you may end up owing your bank additional fees on top of having every cent stripped from your accounts.
Stopping a Bank Levy
If you have the money to pay your IRS tax debt in full before the 21-day waiting period expires, pay it. This can prevent the extra fees associated with a bank levy, which can lead to you paying more than you owe. If you are experiencing an economic hardship, your income may be exempt from a bank levy. It is very important to contact the IRS immediately with documentation of your financial hardship or the hardship seizing the money in your accounts will cause for others. For example, if the money in your accounts is intended as your employee payroll, you may be able to get the levy for that account lifted.
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