There are few things scarier in life than the IRS coming after your hard earned assets. It’s like the adult version of the boogie-man, you like to think it’s not creeping under your bed, but it still has the potential to strike at the worst possible moment.
Do you share this concern? Are you confused about what exactly the IRS can freeze and if it is even possible to avoid losing assets after the IRS begins to plunge into your home, car, or wages?
What does it mean when the IRS wants to freeze my assets?
The IRS has the legal right to seize assets like personal property or funds in a bank account when you fail or neglect to pay income tax owed.
There are a number of reasons why one may fall behind on taxes whether intentionally or unintentionally, but when it does happen there are serious repercussions.
The IRS is entitled to take assets like:
- Personal property
- Funds in a bank account
- Retirement or other special accounts
For the purpose of this article, we only examine assets like a personal bank account which can in effect “freeze” your ability to touch it.
One of the more common ways the IRS goes after funds like a personal or business account is through a bank levy. It notifies you that they now have the right to seize your finances and potentially other assets to reclaim back taxes.
How do you know if the IRS wants to freeze my assets?
The IRS generally reaches out to individuals that they target first through a “Notice of Demand for Payment” and then secondly through a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing”.
Though a person should take the first notice seriously, it is the second warning that is especially troubling.
The “Final Notice of Intent to Levy and Notice of Your Right to a Hearing” hereby gives the individual 30 days to appeal the notice, or to begin making payment arrangements in order to avoid the bank levy.
Can I stop the IRS from freezing my assets?
The first piece of advice after receiving a “Final Notice of Intent to Levy” is not to panic. While it is alarming news, there are ways to stop the IRS from freezing your assets even after you receive the final notice.
You have to remember that after you officially receive the final notice, you have 30 days to appeal or request a CDP hearing. It may seem like a lot of time, but a month passes quickly. So do not put off these serious allegations. Once the 30 days pass, there is no possible way to block the IRS from freezing your assets.
Requesting a CDP Hearing within 30 Days
You have a few options to avoid frozen assets once the IRS sends out the final notice.
One of the most common is to request an appeal through a Collection Due Process (CDP) Hearing. Remember, you do not need to have the hearing within 30 days, only to submit a request for an appeal in that time frame. It will allow you time to get your financials straightened out.
You can get tax help through a professional service that is skilled in handling CDP cases. They can explain the appeal process and what to expect, as well as help in compiling a case for the CDP.
Other Options to Avoid My Assets Getting Frozen
Although not practical in many cases, if you have the funds to pay off the tax debt you should do so immediately. Once the debt is paid in full, the threats will go away.
There is also the option to enter a payment installment agreement with the IRS. Very much like another type of debt you need to settle (such as through a credit card company), you agree to pay x amount of dollars per month for a specified amount of time. Interest is collected during the course of the IRS loan.
Lastly, you have the ability to try and prove financial hardship. It is difficult to make this case on your own, so if you believe you have a legitimate case a tax professional can help offer an initial consultation about eligibility, usually free of charge.
Bank Levy Release
When an individual fails to reach an agreement with the IRS within 30 days of the written notice, the bank levy goes into effect. Account holders can expect to have the account frozen and set aside by the bank for at least 21 days.
The 21-day period reserved by the bank is another grace period as you have a second opportunity to settle with the IRS before all of your funds in the account go to the government on the 22nd day.
In order to do so you need to request a bank levy release. Once again, a tax professional is the most skilled in dealing with bank levy releases and serves as your greatest ally.
In the event you have no bank accounts and are not worried about a bank levy you should think again. The IRS can take wage garnishment from each paycheck. Sometimes wage garnishment is introduced by the IRS in addition to a bank levy.