How to Fight an IRS Levy on Your Bank Account

How to Fight an IRS Levy on Your Bank Account

• Feb 01, 2022

When you owe taxes to the IRS, they can utilize a few different methods to try to collect on that debt. These methods can include garnishing your wages, placing a tax lien on personal property like real estate or vehicles, and placing a levy on your bank account. If you’re facing an IRS levy on your accounts, it’s natural to feel a bit helpless—but you do have options. Here’s what you need to know about tax levies and how you can fight back against them.

What Is a Levy?

If you’ve received a final notice from the IRS regarding a bank levy—which they are required to send before levying your accounts—you might not even be sure what, exactly, that means. Essentially, a bank levy puts a freeze on your bank accounts and requires the bank to send the funds in your accounts to the IRS. While wage garnishment has limits (they can only take a certain percentage of your income), there are no such limits on bank levies.

The IRS can remove all of the funds that are in the account, up to the amount that you owe in taxes. If this sounds like a shocking and stressful experience, that’s because it is. If you owe more than what’s in your accounts, you could find yourself with empty checking and savings accounts, and still have a tax debt to pay.

This is why it is so important to act quickly when you’ve been given a notice of a bank levy. After you receive the notice of IRS, you will have 30 days before the levy goes into effect. Then, the bank must turn your funds over to the IRS no more than 21 days after the levy is put into place. You have a few options for dealing with this problem. Keep reading to learn what they are.

Option 1: Appeal the Decision

The IRS does offer an appeals process for tax-related decisions like these. If the notice you received states you have the right to appeal their decision, then you should take this route as soon as you can, before the freeze on your account goes into effect, and before the deadline to appeal has passed. (The deadline should also be given in your IRS notice.)

The appeals process goes through the IRS Office of Appeals, which is an independent entity from the IRS itself. Their job is to provide an impartial review of your case and reach a final decision regarding the actions being taken against your account. However, this is a long process, and it doesn’t necessarily put the levy on hold. They can pursue with collection actions until the appeal is fully processed. If the appeal brings to light any irregularities in the tax collection process, they can reverse the levy.

But what if the process takes long enough that the funds have already been taken from your account? Your efforts still aren’t in vain; you can actually appeal to have your funds returned to you.

Option 2: Enter into an Installment Agreement

Oftentimes, when you reach an installment agreement with the IRS, all other collection efforts on your account will stop. This includes any bank levies against you. Most installment agreement terms don’t allow for a levy to continue, as you’ve established a separate payment plan that would not require these collection methods.

An installment agreement allows you to take control over your debt by setting up monthly payments with the IRS. For most people, this is far easier to manage than a total emptying of your bank accounts to pay your tax debt.

Option 3: Have Your Account Put in CNC

CNC (currently not collectible) is a status attached to your account that puts a hold on all collection efforts against you. This status is typically only applied to accounts where the taxpayer would experience severe economic hardship if collection efforts were to continue. This does not settle or erase your tax debt; you will continue to accrue interest and fees, and when your economic situation changes, the IRS may resume collection efforts. However, this can be a good way to give yourself some room to breathe, freeze that bank levy, and figure out how you can settle your tax debt.

If you need help with settling your tax debt and fighting against an IRS bank levy, contact the IRS Advocates today. We’ll help you take control of your finances again.