The IRS has the authority to place a levy on your bank account if you owe back taxes, which allows them to seize funds directly from your account to cover the outstanding debt. Understanding the mechanics of bank levies and the steps required to release them is crucial for regaining control of your financial situation.
How IRS bank levies work
When you have unpaid tax liabilities, the IRS can employ several collection methods, one of the most severe being a bank levy. Here’s how the process typically unfolds:
- Notice of Intent to Levy: The IRS first sends you a Notice of Intent to Levy along with a notice of your right to a hearing. This notice provides you with a 30-day window to respond or settle the debt.
- Levy on your bank account: If you fail to respond within the given timeframe, the IRS can instruct your bank to freeze the amount you owe. The bank then holds these funds for 21 days before transferring them to the IRS.
- Funds transfer: After the 21-day holding period, the bank sends the levied funds to the IRS unless you have successfully taken action to release the levy.
Steps to release an IRS bank levy
You have several options for releasing a tax levy. The most straightforward method is to pay your tax debt in full. If this is not feasible, you can contact the IRS to negotiate an installment agreement, allowing you to pay your debt over time. Another option is to apply for an Offer in Compromise, which permits you to settle your tax debt for less than the full amount owed based on your ability to pay. If the levy causes significant financial hardship, you can demonstrate this to the IRS and request a release of the levy. Additionally, upon receiving a Notice of Intent to Levy, you have the right to request a Collection Due Process hearing within 30 days, giving you the opportunity to dispute the levy or propose an alternative payment solution.
Taking action quickly
An IRS bank levy can have a profound impact on your financial stability. Acting swiftly to address the levy and maintaining open communication with the IRS are essential steps to resolve the issue.