The IRS levied your bank account. What do you do now?
An IRS bank levy occurs when the IRS takes a collection action by seizing funds directly from an individual’s bank account to satisfy a tax debt. If you have outstanding debt that you have been unable to resolve voluntarily, the IRS may determine this is the best course of action to get your attention and settle the debt.
An IRS bank levy can happen overnight, and it can make an already difficult financial situation even more challenging. To be granted a partial or full release on the levy, the individual must prove that the levy causes an economic hardship that prevents them from meeting basic, reasonable living expenses.
If the individual can prove they are experiencing a financial hardship or that releasing the levy will help them pay their taxes, they have a chance of a getting a full release from the collection action. To prove financial hardship, an individual must demonstrate the following:
- They have no disposable income
- They are in financial distress with evidence of a foreclosure, a repossession, eviction, shut-off notice from a utility, medical-related hardship or all of the above
- They do not have liquidity or savings
Releasing a levy does not mean that the tax debt is no longer owed – the individual will still be required to make arrangements with the IRS to pay the debt.
An IRS bank levy requires that your bank hold the funds for 20 days before sending them to the IRS. So in the event of a bank levy, an individual can and should use this time to negotiate a release of the levy. Proving financial hardship is not cut and dry, and the successful release of a levy requires the professional and persistent help of a tax accountant.