If you owe taxes, the IRS is able to take money out of your bank account directly to satisfy the tax debt. The IRS will notify you before a levy takes place.
The Internal Revenue Service (IRS) is the government agency that is responsible for collecting the tax revenue that funds the federal government. It is also tasked with enforcing the tax laws passed by Congress and the Treasury. You may be subject to an IRS tax levy if you fail to pay your taxes.
The IRS can take out money from your bank account if you do not pay your taxes. It is a legal seizure of your money or property to satisfy your outstanding tax debt. In other words, it is a government seizure of your assets.
Before the IRS levies your bank accounts and other assets, you must have an outstanding tax debt. Otherwise, the IRS can’t charge your bank. You can legally reverse the levy if you think the IRS has made a mistake.
The IRS can levy your bank account. It can also levy your home or other physical property if used to commit a crime, such as embezzling money or filing false returns.
However, there is no statute of limitations on when the IRS can levy your bank account—they don’t need to wait until you’re old and gray before they decide to take what little money you have left in it. They really only stop if they don’t have any legal grounds for doing so.
If this sounds familiar: It’s because we’ve all seen movies where some villain uses some magical device on their victim, and suddenly there’s no way out for poor Mark Wahlberg!
Fortunately for us, there isn’t anything magical about how the government collects our tax debts. Usually, the first thing you will get is a levy notice that describes what will transpire with the new levy against your assets.
The IRS needs to notify you of its intent to levy money from your bank account. You’ll receive a notice of intent to your last known address, usually sent in the mail. If you don’t receive it, contact them as soon as possible or visit their website. This is important because you'll receive a notice of your right to fight the levy before you receive a final notice of intent.
If the IRS issues a bank account levy without giving any notice first (which is very unusual), they can still try again—and they’ll probably succeed. It is usually in your best interest to pursue a payment agreement of monthly payments if you don't have a legal claim to getting your overdue taxes taken care of.
A levy is a legal action. It’s different from wage garnishment, an IRS-authorized seizure of your property to satisfy the back taxes you owe.
A levy can be used in place of a full-blown bankruptcy filing, and it does not require you to give up any assets or wage income to get out from under your financial troubles. If you have any money levied after an IRS notice of levy, and these additional funds are actually taken by the IRS there are very few exceptions to getting them back. The money taken goes toward your tax liability. If you want to enter into an installment agreement or any other payment arrangement this needs to happen before the funds are moved to the IRS. The time frame you have is a 30-day period after receiving the final notice of intent, and then the 21-day period that the IRS has your money frozen in your checking account or bank account.
To reiterate if you have insufficient funds or just don't pay the entire balance of what you owe after the total of 51 days after receiving the last of the IRS notices, then the IRS will keep all the levied funds and they will not be coming back to you.
A levy is a court order requiring a financial institution to turn over money held in an account. There is a 21-day freeze put in place by the bank on your assets. Banks must comply with levies by placing funds into the Treasury Department’s Financial Management Service reserve fund after the freeze is over. If you have received a levy from your bank, you must understand how the process works and what steps you can take before it happens to avoid problems down the road.
The IRS can take money from your bank account if you have unpaid taxes and don’t pay them. They can legally do so without notice, but they will notify you before doing so. The IRS can also take assets from joint accounts to you are a party. This means that if someone else deposits money into an account with which you’re responsible for paying taxes owed by another party, then those funds could theoretically be taken by the government as soon as they come out of anyone else’s hands!
Laws vary by state; however, we’ll focus on federal law here because most states follow similar guidelines when dealing with levies on their residents’ accounts or properties.
In most cases where someone owes money as part of outstanding debt or lawsuit settlement agreement (such as bankruptcy), they may be served with papers demanding payment within 30 days. Or they face having their wages garnished until they pay back the full amount of what they owe—which could include IRS interest penalties and other late payments fees. For instance, late filing fees or higher interest rates paid on loans taken out during periods when taxes weren’t filed timely due to missed deadlines such as extensions granted by Congress.
You can fight back if the IRS levies your bank account and you don’t agree with the amount. You will need to file a protest in writing within 60 days of receiving notice from the IRS. Here’s a guide to follow:
If the IRS needs to collect on a debt, they may choose to levy your bank account. This means the IRS will take all the money in your bank account up to the amount owed. There is a chance that you will not be able to pay all of your bills if the IRS levies your bank account.
You should contact an attorney right away if you are facing a levy. An attorney can help you stop the levy, negotiate a payment plan, and/or represent you at a hearing to prevent your bank account from being levied by the IRS. The good news is most attorneys offer a free consultation.
This is not financial advice or legal advice. Make sure to consult with a professional before moving forward with any action.