When the IRS levies your bank account, money you need for rent, payroll, bills, or everyday expenses can suddenly be unavailable. An IRS bank levy allows the government to take funds from your account to satisfy unpaid federal taxes.
Gabaie & Associates helps individuals and business owners in Frederick challenge IRS collection actions, seek the release of bank levies, and explore tax resolution options based on their financial circumstances.
Need help with an IRS bank levy in Frederick? Call Gabaie & Associates at (410) 358-1500 or contact the firm online to discuss your situation.
What Is an IRS Bank Levy?
An IRS bank levy is a legal action that allows the IRS to seize money in a taxpayer’s bank account to pay an outstanding federal tax debt. Unlike a tax lien, which creates a legal claim against property, a levy actually takes property or funds.
When the IRS sends a levy to your bank, the bank is required to place a hold on the funds subject to the levy. The bank then follows specific procedures before sending the funds to the IRS.
The amount affected by the levy can depend on the funds available in the account when the bank receives the levy. A bank levy can therefore create an immediate financial problem, particularly if the account contains money needed for household expenses, business operations, or other essential obligations.
How Does an IRS Bank Levy Work?
The IRS generally must take several steps before it can levy your bank account. The agency typically must assess the tax, send a notice and demand for payment, and provide notice of its intent to levy and your right to a hearing.
If the tax debt remains unresolved, the IRS may issue a levy to your financial institution. The bank then identifies the funds subject to the levy and places them on hold.
The 21-day holding period is important. Once that period ends, the bank generally sends the levied funds to the IRS. If you receive a levy notice, waiting until the money is transferred can make the situation more difficult.
There are circumstances in which the IRS may release a bank levy. The appropriate approach depends on why the levy was issued, the status of the tax debt, and your financial circumstances.
Can the IRS Take Money From Your Bank Account?
Yes. The IRS has authority to levy funds in a bank account when the requirements for collection have been met.
A bank levy is different from an ordinary creditor’s garnishment. The IRS does not generally need to obtain a court judgment before using its federal tax collection powers. Instead, it follows the procedures established under federal tax law.
The IRS may levy funds held in checking, savings, and certain other financial accounts. A levy may affect personal or business accounts, depending on who owes the tax and whose funds are held in the account.
Not every situation is the same, however. Certain funds may receive special protection, and the IRS may release a levy when specific legal or financial circumstances apply.
How Long Does the IRS Hold Money From a Bank Levy?
A bank levy is different from an IRS wage levy because a bank levy generally reaches the funds that are available in the account when the levy is received.
The bank typically holds the affected funds for 21 days before sending them to the IRS. After the funds are transferred, the bank levy itself has done its job, but the underlying tax debt remains unless it has otherwise been resolved.
That means releasing a bank levy does not necessarily eliminate the tax liability. You may need to address the underlying debt through an installment agreement, an Offer in Compromise, Currently Not Collectible status, or another appropriate resolution.
Can an IRS Bank Levy Be Released?
In some circumstances, yes. The IRS may release a levy for reasons recognized under federal tax law, including situations involving economic hardship or an error in the collection process.
For example, a levy may need to be addressed if it is preventing you from meeting necessary living expenses or if you have already resolved the tax liability that led to the collection action.
Other situations may also warrant review. You may have entered into a payment arrangement, filed for bankruptcy, or have grounds to dispute the underlying tax assessment.
The key is determining why the IRS issued the levy and what has changed since the collection process began. A tax professional can review the notices, tax account, and financial information to determine which options may be available.
What Should You Do If the IRS Has Already Levied Your Bank Account?
If you discover that the IRS has placed a levy on your bank account, act quickly. The bank may be holding funds that have not yet been sent to the IRS, and the 21-day holding period can give you a limited window to address the collection action.
Start by gathering the documents related to the levy, including:
- The IRS levy notice
- Earlier notices about the tax balance
- Recent bank statements
- Tax returns for the years involved
- Records of any payments or payment arrangements
- Information about your income and necessary living expenses
If the account contains money needed for essential expenses, that information may be important when evaluating whether the levy is creating an economic hardship.
Do not wait for the 21-day period to expire before reviewing your options.
What If You Cannot Afford to Pay Your Tax Debt?
An IRS bank levy can create serious problems when the money in your account is needed for basic living expenses. Economic hardship may be a basis for seeking release of an IRS levy when the collection action prevents you from meeting necessary living expenses.
Economic hardship may be a basis for seeking release of an IRS levy. The IRS considers whether the collection action is preventing a taxpayer from meeting necessary living expenses.
Other tax resolution options may also be available. Depending on your financial circumstances, you may be able to enter into an installment agreement, request Currently Not Collectible status, or pursue an Offer in Compromise.
These options do not apply to every taxpayer. The right approach depends on factors such as your income, expenses, assets, tax liability, and ability to pay.
How Can a Frederick Tax Attorney Help With an IRS Bank Levy?
When the IRS has levied your bank account, you may need to address both the immediate collection action and the tax debt behind it.
A tax attorney can review your IRS notices and tax account, determine whether the levy was properly issued, and evaluate potential ways to have the levy released. Depending on the circumstances, the attorney may also help you pursue a longer-term resolution of the tax debt.
At Gabaie & Associates, the process may include:
- Reviewing IRS notices and your tax account
- Determining whether the bank levy was properly issued
- Reviewing the underlying tax liability
- Evaluating your income, expenses, assets, and financial obligations
- Requesting release of a bank levy when appropriate
- Negotiating an installment agreement or other payment arrangement
- Seeking Currently Not Collectible status when you cannot afford to pay
- Pursuing an Offer in Compromise when you meet the requirements
- Challenging errors or disputes involving the tax assessment
- Communicating with the IRS on your behalf
The goal is to address the collection action while working toward a solution for the underlying tax debt.
Do You Need an IRS Bank Levy Attorney in Frederick?
If you live or operate a business in Frederick and are dealing with an IRS bank levy, Gabaie & Associates can review your situation and explain your options.
The firm has a Frederick office at 5100 Buckeystown Pike, Suite 250A, Frederick, MD 21704. Juda Gabaie represents taxpayers before federal and state tax authorities and is admitted to the U.S. Tax Court and Maryland Tax Court.
If the IRS has levied your bank account, do not wait for the funds to be transferred before seeking help. Call Gabaie & Associates at (410) 358-1500 or contact the firm online to discuss your situation.
Frequently Asked Questions About IRS Bank Levies in Frederick
Can the IRS take money from my bank account without warning?
The IRS generally must provide required notices before issuing a bank levy. If you received an IRS levy notice, review it carefully to determine what collection action has been taken and what deadlines may apply.
How long does an IRS bank levy last?
A bank generally holds funds subject to an IRS levy for 21 days before sending them to the IRS. The underlying tax debt remains unless it is otherwise resolved.
Can an IRS bank levy be stopped?
In some cases, yes. The IRS may release a levy under certain circumstances, including economic hardship or an error in the collection process. Other tax resolution options may also provide a way to address the debt.
What happens if the IRS already took the money from my account?
Once the bank has transferred the funds to the IRS, recovering them may be more difficult. The circumstances surrounding the levy and the funds involved should be reviewed to determine whether any further action is available.
Can you help if the IRS levied my business bank account?
Yes. Gabaie & Associates represents individuals and businesses with federal tax problems, including IRS collection actions involving bank accounts, liens, and levies.
Get Help With an IRS Bank Levy in Frederick
An IRS bank levy can put money you need out of reach with little room to delay. Understanding why the levy was issued, whether the funds are still being held by your bank, and what options may be available can help you determine what to do next.
If you are dealing with an IRS bank levy in Frederick, call Gabaie & Associates at (410) 358-1500 or contact the firm online to discuss your tax situation.
