Bank Levies: What they are and how to prevent one

If you currently have a tax debt, you may be contacted by the IRS with a threat of a bank levy — but what is a bank levy and how do you prevent one?

What is an IRS bank levy?

A bank levy is an action taken by the IRS to satisfy a tax debt. While to some it may sound similar to a lien, a levy is a legal seizure of property in response to your tax debt, whereas a lien is only a claim against your property. However, a lien affects your credit report while a levy does not.

Specifically, an IRS bank levy occurs as a result of a tax audit. If you are unable to pay taxes owed, the IRS can request that your bank levy your account, thereby putting your funds on hold. After 21 days, they will deduct the amount owed to them from your account directly. Any new money that is added to your account will also be seized by the IRS as well until the debt is repaid.

When will I receive an IRS bank levy?

Luckily, the bank levy notice doesn’t come out of nowhere. Even if you have years of unfiled taxes or owe a tax debt, the IRS will go through a number of steps before issuing the levy: this includes sending the bill to your home, sending notices that request the payment of the tax debt, and a final notice that a tax levy might be imposed on your property.

What can I do when I receive a bank levy notice?

Talking to a tax defender should be your first step. Though the IRS is usually accurate in regard to how much money you owe them, having a professional look over your case is essential to preventing the seizure of your property. As soon as you receive the first notices, speak to a tax defender and assess your options.

Your tax defender might lay out a few of the following options for you. The first is a payment plan to slowly pay back the IRS over a set period of time. This type of agreement can be great if you have a steady income, but it might not be an option for those who have fallen on hard times. If you can prove financial hardship, then the the IRS assets seized can be postponed until a later date.

How do I prevent one?

There are a few things you can do to prevent receiving an IRS bank levy. Firstly, keeping up to date on all of your taxes is essential. Paying the amount due in full and at the correct time will prevent future problems. Additionally, be sure to keep the last seven years of your tax records on file in the event you are audited. Tax information isn’t always accurate and miscommunications can occur. Keeping a backlog prevents discrepancies from occurring and proves that you have paid taxes in previous years.