IRS Bank Levy Notice - Timeline and Solutions

Understanding IRS Bank Levy Notices

Receiving an IRS bank levy notice can be alarming. This document outlines what you need to know about the timeline, potential consequences, and proactive steps to take if you receive such a notice.

What is an IRS Bank Levy?

An IRS bank levy is a legal action allowing the Internal Revenue Service to seize funds directly from your bank account to satisfy outstanding tax debts. Authorized under Section 6331 of the Internal Revenue Code, a levy is typically a last resort after multiple attempts to collect taxes have failed.

Timeline of a Bank Levy Notice

• Notice of Tax Due and Demand for Payment: The IRS will first send a bill outlining your debt.
• Notice of Intent to Levy and Right to a Hearing (Final Notice): If the debt remains unpaid, the IRS will issue Notice CP504, followed by Letter 1058 or Letter LT11, giving you a 30-day window to request a Collection Due Process (CDP) hearing.
• Levy Action: If the debt remains unresolved after 30 days, the IRS can levy your bank account.

Solutions to Address a Bank Levy

If you receive a bank levy notice, prompt action is essential. Here are steps you can take:

1. Request a Collection Due Process Hearing

You have 30 days from the date of the final notice to request a CDP hearing. This step temporarily halts levy activities and allows you to discuss payment options or contest the levy.

2. Enter into an Installment Agreement

Setting up a payment plan with the IRS can stop further collection actions, including levies. Use Form 9465 to request an installment agreement.

3. Submit an Offer in Compromise

An Offer in Compromise allows you to settle your tax debt for less than the full amount owed. Ensure you meet the criteria outlined in Form 656-B.

4. Prove Financial Hardship

If the levy causes financial hardship, you can request a hardship exemption. Provide detailed financial information to the IRS to support your claim.

5. Pay the Debt in Full

Though not feasible for everyone, paying the debt in full will immediately release the levy.

Consequences of Ignoring a Bank Levy

Ignoring a bank levy notice can result in significant financial loss, as the IRS will directly withdraw funds from your bank account. Continued non-compliance could also lead to additional penalties and interest, exacerbating your financial burden.

Preventing Future Levies

• Keep Tax Returns Current: File your taxes on time to avoid accruing additional penalties and interest.
• Regularly Review IRS Notices: Respond promptly to any IRS communications to prevent escalation of collection actions.
• Consult a Tax Professional: Consider enlisting help from a tax professional to ensure compliance and resolve any outstanding issues.

It's crucial to understand your rights and the available solutions if faced with an IRS bank levy. Don't delay in taking action to address your tax obligations.

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