Continued From How to Deal with an IRS Bank Levy – Part One
IRS bank levies are a rather extreme, though sometimes necessary, measure to force compliance on the part of the taxpayer. However, there are some statutory safeguards in place designed to help protect the taxpayer against erroneous levies and to give them the opportunity to resolve the liability without the IRS having to resort to levy (levies require administrative costs on the IRS’s part, thus they prefer voluntary compliance).[1]
REQUIREMENTS OF A VALID IRS BANK LEVY
First, IRS bank levies cannot occur for any amount greater than the amount needed for the IRS to satisfy the liability in question. Furthermore, there are three procedural requirements that the IRS must follow in order to execute any levy. These are:
1. The IRS must have assessed the taxes underlying the basis for the levy and have sent a Notice and Demand for Payment to the taxpayer. Keep in mind that receipt of this notice, or any IRS notice, by the taxpayer is not required. All that is required under statute is that the IRS sends its notice to the last address it has on file.
2. The taxpayer must have neglected to pay the stated tax underlying the assessment. This includes penalties and interest.
3. The IRS must send two more notices to the taxpayer: a Notice of Intent to Levy and a Final Notice of Intent to Levy. The Final Notice of Intent to Levy must be sent at least thirty days prior to an IRS levy in order to give the taxpayer time to work out a resolution and/or appeal the IRS levy. Generally, levies will not occur immediately after the thirty (30) day period has expired because of the administrative approval that the IRS needs internally to begin the levy process. Taxpayers can GENERALLY count on being levied between 2-3 weeks after this thirty (30) day period has expired. However, it is critical to note that all allowable taxpayer assets are subject to levy after this period has expired. Levies can and do occur immediately after, especially if the taxpayer has been assigned to a revenue officer or other senior collections agent.
THE BEST WAY TO DEAL WITH A BANK LEVY
IRS bank levies are a powerful collections tool used by the IRS meant to usher compliance on the part of the taxpayer. That said, they often cause great inconvenience and place extraordinary burden on the taxpayer. In addition, IRS bank levies can be issued erroneously or abused by some members of the IRS in certain circumstances. The best approach to dealing with an IRS bank levy is to deal with the problem as soon as possible. If you discover the levy within the twenty-one (21) day holding period, you may be able to convince the IRS to release it. The IRS will be generally reluctant to do so, absent compelling reason, but once those funds are gone than there is basically no chance the IRS will surrender them.[2]
As with most IRS problems, the best defense is a good offense. Contact with the IRS, even if it is just to buy yourself time to resolve the issue, goes a long way to preventing IRS bank levies or other adverse actions. If you have been already levied, you should be aware that they will keep coming after you until the liability has been satisfied in full. Once the steps outline above have been completed, the IRS is not required to go through them again to initiate another bank levy. If you run into trouble or believe you have been levied erroneously, then you should contact a tax professional immediate to step in and handle the situation.
Need help with dealing with your IRS bank levy? Please visit any of the following for more information.
Tax resolution services for small businesses and mid-size businesses (business tax resolution)
Legal representation before IRS collections
Remember, the first consultation is always free. Please contact us directly for more information.
[1] Note that some funds are exempt from bank levy and may be restored to the taxpayer after the levy is initiated with proper substantiation. Here is some more information on property exempt from tax levies.