Unfortunately, when you don’t pay your taxes, the IRS or the local state begins to look for ways it can collect the money that you owe. This often results in a levy. One type of levy is a bank levy, which can result in lose money, frozen funds and difficulty dealing with routine living expenses. If you owe back taxes, it is important to understand the IRS and state bank levy process, your rights and the IRS and state bank levy release options available to you.
What is a Bank Levy?
First, it’s essential to understand what a bank levy is. A state or IRS bank levy is a seizure of your bank account in order to satisfy your tax debt. Failing to pay taxes or set up a tax payment plan gives the state or IRS the power to levy your bank, which results in a freeze of your bank accounts and a seizure of the money you owe. Although the bank accounts may not have enough money to pay off the tax debt, the levy will take the money available and keep the account frozen until you have paid off the debt. Bank levies may be issued more than once until the taxes have been paid. Not only can you lose money to the state or IRS, but insufficient funds in your account may result in penalties and fees from the bank, causing further financial damage. Both checking and savings accounts can be levied, and in some cases, the IRS or state may even be able to levy funds you have in offshore bank accounts.
Understanding the IRS and State Bank Levy Process
Understanding the IRS and state bank levy process can help you avoid dealing with a bank levy. Before a bank account is levied, the IRS or state will generally assess the amount owed on taxes and demand that you pay the amount owed. Once you receive the notice that demands your payment, if you fail to pay or come to a resolution on the taxes owed, then you may receive a final notice of the intent to levy your bank account. This generally is sent out 30 days before a levy is implemented. After these conditions are met, then your bank may be contacted to decide if a levy will be the best method to seize funds to help pay off back taxes.
IRS and State Bank Levy Release Options
If you are facing a bank levy to pay off taxes owed, there are several IRS and state bank levy release options to consider. The specific option you choose will depend on your specific situation financially. The first option is to pay off your taxes in full, which will immediately stop the bank levy. To pay off the debt in full, consider refinancing your home, borrowing from family members or selling valuables to make this payment and eliminate the levy. An installment agreement is another of the options available for an IRS and state bank levy release. An installment agreement allows you to pay the taxes owed in monthly payments over a set period. You may also be able to show that levying your bank account is causing financial hardship, which may allow you to be declared, “Currently Not Collectible.” This will temporarily eliminate a bank levy. Last, it is possible to offer to settle the taxes owed to the state or IRS for an amount that is less than the amount you owe.
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