Updated: Mar 15, 2024

What to Do if IRS Has Issued a Levy on Your Bank Account

Tips on how to avoid an IRS tax levy and what to do if you happen to be hit by one. Learn the steps you can take and how to negotiate with the IRS.
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If you are a taxpayer who has not paid your taxes in full or at all, do not be surprised if the Internal Revenue Service has issued a levy on your bank account. This levy means the IRS has the ability to take funds from your bank account as payment for your balance due on your tax bill.

The IRS is one creditor you do not want to avoid. The government has the authority to get the money owed to them. This means they can legally take action against you, including taking funds from your bank account until your debt is paid in full. The IRS may also place liens against your personal property. Fighting the IRS is not easy so it is best to handle your matters proactively to avoid legal hassles and additional expenses.

Avoiding the levy

Prior to the actual levy being put into place and funds being withdrawn from your account, you will receive written notification of the process that is going to occur in advance. To confirm this notification, the IRS will send a certified letter to your home and if you wish to avoid this levy, you need to respond.

There are some options you have once you receive the notice of the levy. The IRS offers a form (Form 12153) to fill out in order to request a hearing on the tax collection process. Once the form is submitted to the IRS, you will have an additional 30 days to work out a payment plan to stop the levy.

Typically, the IRS just wants the money due to them. They are willing to work out a deal with a taxpayer that owes taxes but is unable to make a lump sum payment. Many individuals are not aware of the assistance options being offered by the IRS because rather than contact the agency, the consumer tries to duck out on the debts.

Financial hardships

There are a few options the IRS offers those experiencing financial hardships. One option is an Installment Agreement. This allows taxpayers to make reasonable monthly payments towards the balance of the tax debt until it is paid in full. Provided the amount paid each month is adequate in relation to the size of the debt, the IRS will generally approve the agreement.

Another option is the Offer in Compromise. This allows the taxpayer to request the balance due on their tax bill be reduced to a more reasonable amount. Through an Offer in Compromise, one must prove they do not have the financial means to repay their tax debt in a reasonable amount of time. This option may be used if you are experiencing expensive medical problems, are unable to work, or have lost your job. Not all Offers in Compromise will be accepted by the IRS but if you are struggling, it is certainly worth your time to investigate your options.

Levy enacted, now what?

If you are unable to negotiate a settlement with the IRS or if you have taken no action to stop the levy, there may still be an option remaining. After the agency levies your bank account, there is a period of 21 days where you can continue the negotiation process. After the 21 days have passed, the IRS can take your money and you will not have access to it.

This can seriously complicate your life. Not having the ability to get your money can make life very difficult and your other debts will begin to pile up. Rather than create a vicious circle of problems, it is best to take a proactive stance with the IRS. Find out what can be done to prevent or remove the levy while you still have time. If you continue to delay the negotiations out of fear, you will have a lot more red tape to wade through once the levy is in place.

The Internal Revenue Service, despite popular belief, is not in business to make people’s lives terrible. The options created to help those with back tax debts can be a viable way to avoid bank levies and other legal troubles. Find the proper phone number for your local IRS office to request help. Any correspondence you receive from the IRS office will contact the appropriate contact information concerning your account.

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