Every year, the IRS takes money from taxpayers to make sure the legislative branch of the federal government gets paid. But sometimes, they can seize funds in your checking or savings accounts to make up for what is owed. Recently, this happened to me, and the IRS took money from my bank account! This process can be difficult for people who do not understand why or how it works.
This blog post will cover why this can happen to you and what you can do after it happens, how to avoid it in the future, and more.
Why did the IRS take money from my bank account?
The Internal Revenue Service is a highly effective and powerful government agency. If you owe them money, they will do everything in their power to collect it and make sure that you pay what is owed. One tactic the IRS uses to collect money is to seize funds from a person’s bank account.
There are a number of reasons why the IRS might take money from your bank account. One common reason is that you owe back taxes. If you have not paid your taxes or not paid in full, the IRS may take money from your bank account to satisfy that debt.
Another common reason the IRS might seize funds from your bank account – if you have a large outstanding balance on a federal student loan. The government can seize money from your bank account to repay that loan.
The IRS can also take money from your bank account if you owe child support or alimony payments. And, finally, if you owe money for any other federal debt, the IRS can collect that money by taking funds from your bank account. And for that, there will be no tax refund.
When Does the IRS Take money?
Taxpayers who make bank deposits and withdrawals should be aware of the IRS’s authority to seize their accounts.
If you owe taxes, the IRS can levy your bank account, which means legally seizing your funds or assets until the debt has been satisfied.
Not all taxpayers who retain a balance in a U.S. bank are at risk of an IRS bank levy. Before seizing a bank account, the IRS will make several attempts to recover taxpayer debts.
However, the IRS will frequently avoid this approach unless they believe the debtor has made no effort to pay his or her taxes.
To levy a bank account, the IRS will finally issue a Notice of Levy to the taxpayer. The notice will state the specific tax debt that is being enforced and provide the taxpayer with a contact number for questions.
It will also issue a Notice of your Right to A Hearing. Remember, If you receive the final notice, you have 30 days to take action to protect your Bank accounts.
But in some cases, the IRS may not issue the final 30-day notice. It only happens if they think the fund you owe is in jeopardy for collection. So instead, you will get a notice about your appeal rights.
They’ll then notify your bank of the tax levy, and your bank has to freeze the funds in your accounts for a 21 day period.
If the bank doesn’t receive any further notices from the IRS, they’ll distribute the funds to them, and then the IRS will start applying them toward your outstanding taxes.
How Do I Get a Levy Released?
If you have received a levy from the IRS, it is important to take action immediately. You can contact a bankruptcy attorney before going to the IRS.
A levy can seriously disrupt your business and personal life, so it is important to take steps to get it released as soon as possible.
The first step is to contact the IRS and explain your situation. You will need to provide information about why the levy should be released.
The IRS uses automated processes when it comes to levies. Your appeal should match your actual situation, or you could face delays in getting your levy released.
The most common reason for the release is, – if the levy prevents you from meeting your basic living expenses or paying unpaid taxes or if the levy is creating an undue financial hardship. You will have to present proper documentation to support your claim.
If you do not have the money to pay the taxes that are owed, you may be able to work out a payment plan with the IRS. This can help you avoid having a levy placed on your bank account.
The IRS may release a levy if it thinks:
- You have already paid the due amount,
- The deadline for recovery ended before the levy was issued.,
- The IRS has already sent you a bill, so releasing the levy will assist you in paying your taxes.,
- You enter into an Installment Agreement, and the conditions of the contract do not allow for the levy to be maintained.,
- It may put you into an economic hardship
You can also seek help from a tax professional or from the IRS Taxpayer Advocate Service. The Taxpayer Advocate Service is an IRS agency that provides assistance to taxpayers in resolving tax-related difficulties.
What are the options Do I have to Protect Bank Accounts from an IRS Levy?
There are a few things you can do to protect your bank accounts from the IRS.
Request a Collection Due Process hearing
If you believe that the levy is not valid, you can request a Collection Due Process (CDP) hearing. If the IRS agrees that the levy is not valid, it will stop levying your accounts and return your funds.
The CDP hearing must be requested within 30 days from when you receive a notice from the IRS demanding payment of taxes due.
Include a CDP hearing request with your Response to the Lawsuit
If you do not request a CDP hearing within 30 days of receiving notice from the IRS that it intends to levy your accounts, then the agency will contact the bank directly about freezing or taking funds out of your account.
You can include your collection due process petition in the response filed by your attorney. This will give the bank additional time to stop the levy before it freezes or takes funds from your account.
Requesting a Temporary Restraining Order
You can file a motion with the court to request that the IRS be prohibited from levying your accounts while you are waiting for a CDP hearing.
This is called a Temporary Restraining Order (TRO), and if granted by the court, it will stop the IRS from taking any further action against you.
Filing for Bankruptcy
If you are unable to reach an agreement with the IRS or if the levy is causing you financial hardship, you may want to consider filing for bankruptcy.
No matter what you do you should first contact a tax expert or an attorney.
How Can I Avoid My Bank Account Seizure by the IRS?
If you are having trouble paying your taxes, then you should talk to a professional about the options available for you.
The longer you put off dealing with this issue, the more likely it is that the IRS will find other sources of money that belong to you. It’s often better to take care of this problem sooner rather than later if at all possible.
Here are some tips to help you prevent the IRS from seizing your bank account in the first place:
File Your Taxes on Time
The best way to avoid any problems with the IRS is to file your taxes on time every year. If you are behind on your taxes, then the IRS will be more likely to take action against you.
Pay the Right Amount of Taxes
If you are self-employed, it is your responsibility to pay both the employer and employee portions of your FICA taxes. If you fail to withhold or pay these taxes, then the IRS will most likely take action against any bank accounts that they have access to.
Pay as Much as You Owe
If the IRS has assessed a deficiency against you, then it is in your best interest to pay as much as you owe by sending a paper check money order credit card, or debit card payment to the United States Treasury Department.
If you do not, the IRS may seize any funds they can find and apply them to your outstanding balance.
What if I Don’t Have Enough Money in My Bank Account to Cover the Levy?
If the IRS seizes money from your bank account and you don’t have enough to cover the levy, then they will likely take other assets that you may have such as property or a vehicle. It’s important to remember that the IRS has many different ways of collecting money from you. So it’s best to try to avoid this situation altogether by paying your taxes on time. And taking other measures to reduce your tax liability.
If you are currently struggling to pay your taxes, it is important to seek help as soon as possible. The IRS will not hesitate to take whatever steps are necessary to collect the funds that are owed, including seizing bank accounts.
An experienced tax attorney can help you negotiate a payment plan or an offer in compromise so that you can get back on track with paying your debt to the IRS.
In my case, the IRS seized my bank account linked with my social security. Later on, I entered into an Installment for my due tax return. My attorney handled the case as I wanted, according to my financial situation, and solved it within 21 days. I shared all the information that I got from my experience in that situation.