What is an IRS Bank Levy? And How a Tax Firm Can Help Resolve It

If you owe back taxes and the IRS hasn’t been able to collect payment from you, they have the legal authority to take more drastic measures. One of these measures is a bank levy. This is when the IRS seizes funds directly from your bank account to satisfy your unpaid tax debt. It’s a serious action that can cause significant disruption to your financial life. But don’t panic—there are ways to resolve it. Let’s walk through what an IRS bank levy is, how it works, and how a tax firm can guide you through the process to get it resolved.

What Is an IRS Bank Levy?

A bank levy occurs when the IRS takes money directly from your bank account to pay off your unpaid tax debt. If the IRS has made repeated attempts to collect the debt through notices, phone calls, and other methods, and you haven’t made arrangements to pay, they can initiate a bank levy.

Here’s how it works:

1. Notice of Levy
   Before they seize your funds, the IRS will send you a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing. This gives you the opportunity to pay your taxes, set up a payment plan, or challenge the levy before it happens.

2. Bank Account Seizure
   If you don’t respond or make payment arrangements, the IRS will contact your bank and instruct them to freeze your account. The bank is required by law to comply, and they may hold your funds for up to 21 days.

3. Funds Taken
   After the 21-day holding period, the IRS can seize the funds in your account to cover your tax debt. Your bank may release the money directly to the IRS, and it will no longer be available for you to use.

What Does This Mean for You?
A bank levy can be extremely disruptive. Your account will be frozen, meaning you won’t have access to your money. This can affect your ability to pay bills, cover essential living expenses, or conduct regular business.

How to Resolve an IRS Bank Levy

If the IRS has levied your bank account, it’s important to act quickly. There are a few ways you can resolve the situation:

1. Pay the Debt in Full
   If you’re able to pay your full tax debt, the levy can be released immediately once the payment is made. However, if you can’t afford to pay the full amount, there are other options.

2. Set Up an Installment Agreement
   If you can’t pay all at once, you may be able to set up an IRS payment plan (also called an installment agreement). This will allow you to pay off your debt over time, and the IRS will release the levy once the plan is in place.

3. Request a Release of Levy
   If the levy is causing significant financial hardship, you may be able to request a release of the levy. This requires demonstrating to the IRS that the levy is preventing you from meeting basic living expenses.

4. Offer in Compromise
   If you can’t afford to pay your full tax debt and are experiencing financial hardship, you may be eligible for an Offer in Compromise (OIC). This allows you to settle your tax debt for less than you owe. If the IRS accepts your offer, the levy will be released, and you’ll pay a reduced amount.

5. Appeal the Levy
   If you disagree with the levy or the way the IRS is handling your case, you can appeal the decision. The IRS allows you to request a hearing to present your case and try to get the levy lifted.

How a Tax Firm Can Help You Resolve an IRS Bank Levy

Dealing with an IRS bank levy on your own can be overwhelming, especially if you’re not familiar with the process. A tax professional or firm can guide you through each step to make sure you take the right actions to resolve the levy and prevent further issues. Here’s how a tax firm can help:

1. Negotiate with the IRS on Your Behalf

A tax firm can communicate directly with the IRS on your behalf. This takes the burden off your shoulders and ensures that your case is being handled professionally. They can help you set up an installment agreement, submit an Offer in Compromise, or negotiate a release of levy if it’s causing undue hardship.

2. Assess Your Financial Situation

A tax firm will carefully review your financial situation, including income, expenses, assets, and liabilities, to determine the best solution for you. They’ll help you understand your options, whether it’s qualifying for a reduced settlement through an OIC, negotiating a manageable payment plan, or challenging the levy based on financial hardship.

3. Guide You Through the Legal Process

The IRS has strict rules when it comes to bank levies, but there’s also room for negotiation and potential relief. A tax firm can help you navigate the legal aspects of the process, ensuring that you’re in full compliance with the IRS while also protecting your rights.

4. Help You Avoid Future Levies

Once your bank levy is resolved, a tax firm can help you prevent future levies from happening. This may involve setting up a sustainable payment plan, helping you become tax compliant going forward, and advising you on the best ways to handle any ongoing or future tax issues.

Why You Should Act Fast

If you’ve received an IRS notice about a bank levy—or if your account has already been frozen—it’s important to act fast. The IRS is legally allowed to take your money, and waiting too long can make it harder to resolve the issue.

The sooner you seek help from a tax firm, the sooner they can take steps to stop the levy, protect your assets, and help you find a manageable solution. By working with professionals who understand the ins and outs of the tax code, you increase your chances of resolving the issue quickly and efficiently.

How Jack & Dot Can Help

At Jack & Dot, we specialize in helping clients resolve IRS bank levies and other tax-related issues. We understand how stressful it can be to have the IRS take direct action against your finances, and we’re here to help you navigate the process. Our experienced team can guide you through every step, from negotiating with the IRS to setting up payment plans and resolving disputes.

If you’re facing an IRS bank levy or any other tax issue, don’t wait. Contact Jack & Dot today to discuss your options and take the first step toward resolving your tax problems.