How to Deal With an IRS Bank Levy – Part One

When you owe a balance due to the IRS and fail to resolve that balance in a timely manner through one of the approved resolution methods, the IRS takes increasing stern action to try and force compliance on your part. One of these avenues is though an IRS bank levy. An IRS levy is defined as “a legal seizure of your property to satisfy a tax debt.”[1] In the case of an IRS bank levy, the IRS takes money from your checking or savings account in order to satisfy your outstanding tax liability. Although the IRS is required to send notice of its intent to levy under statute, it usually does not tell you when it plans to seize money out of your checking account. Sometimes this puts taxpayers in a precarious position because they count on funds being in these accounts that are no longer available due to the IRS levy.

The IRS bank levy process is initiated by a notice sent from the IRS to the bank that is holding your assets. Usually, the IRS will only send one levy notice at a time, but they will eventually get around to sending notices to every bank where they have reason to believe that you are holding assets in. From this point, the bank retains the money for twenty-one (21) days prior to releasing the funds to the IRS. After this twenty-one (21) day period, the bank, by law, must release the funds to the IRS. No further action is required on the part of the IRS to receive funds. Taxpayers will not have access to any funds levied during this period.[2] To add insult to injury, banks will usually charge an administrative processing fee to your account for handling the levy. Even if the levy is erroneous, getting this processing fee back from the IRS is not usually worth the time expended. Also, it is important to be aware that the IRS is not just limited to levying one source of assets. Taxpayers should be aware that the IRS can also go after wages, accounts receivables, merchant accounts, or almost any other asset in possession of the taxpayer to satisfy the liability.