What is a Bank Levy?
A Bank Levy is when the IRS, or California Franchise Tax Board freezes the money in your bank or financial account. It attaches to the money in your account at that moment. The money is held, usually for 21 days, when it is released to the tax authority. Once the money is released it is very difficult to recover. And, be prepared for overdrats and a bank charge of $135.
A Bank Levy is used when a delinquent taxpayer ignores notices to pay past due taxes. Once the IRS sends a ‘Notice of Intent to Levy and Notice of Right to Appeal’ the next move is a bank levy, or wage garnishment. You have 30-days to file an appeal once you recieve the notice. A Bank Levy is an extreme action to get your attention.
Releasing a bank levy can be accomplished a few different ways. One is to show 'hardship' (the form to use can be found here). Be careful if you are not familiar with the process. Maybe it is time for a FREE consultation.
Will I receive a notice before the IRS issues a bank levy?
Yes, typically Form LT11 or Form L1058, both of which are Notices of Intent to Levy and Notice of Right to Appeal.
Can I appeal my levy?
Yes. You can appeal within 30 days of receiving the notice. Once the levy is in place it is usually better to negotiate rather than try to appeal. You would however, want to appeal if you don't actually owe the money.
What’s the difference between a bank levy and a wage garnishment?
A bank levy is a one-time occurrence allowing the IRS, or California Franchise Tax Board to drain your bank account up to the amount you owe. Normally they will not seize any money you deposit into your account after the levy. They would have to file another levy to do that, but would you want to put money back in an account that has already been levied? Best to deal with the situation proactively.
A wage garnishment, on the other hand, is a continuous action that does not stop until the total amount owed is collected.
It’s just my accounts that are at risk, correct?
Social security, pension, wages, 1099 income, 401K, IRA, Stocks, Bonds, checking or savings accounts are all at risk. The taxman will look for liquid assets first. In more aggresive actions they can take homes, cars, collections, real estate or anything of value.