Understanding the IRS Bank Levy Notice: Timeline and Solutions

Introduction to IRS Bank Levy Notices

An IRS bank levy notice is a serious matter that requires immediate attention. It signifies that the Internal Revenue Service (IRS) is taking action to collect an unpaid tax debt. Understanding the timeline and the solutions available is crucial for taxpayers who find themselves in this situation.

What is an IRS Bank Levy?

A bank levy is a legal action that allows the IRS to seize funds directly from a taxpayer's bank account to satisfy a tax debt. According to 26 U.S. Code § 6331, the IRS is authorized to levy after providing a notice. The process typically follows a series of communications and requires compliance with specific legal procedures.

Timeline of an IRS Bank Levy Notice

1. Initial Contact

The process generally begins with the IRS attempting to contact the taxpayer via correspondence. This usually involves a Notice and Demand for Payment - the initial bill sent by the IRS.

2. Notice of Intent to Levy

If the taxpayer fails to respond or make payment arrangements, the IRS will escalate by sending a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing (also known as a LT11 or Letter 1058), in accordance with Internal Revenue Code § 6330.

3. 30-Day Waiting Period

Once the final notice is issued, the IRS must wait 30 days before proceeding with the levy. This period allows the taxpayer to take corrective action or request a Collection Due Process (CDP) hearing.

4. Execution of the Levy

If no resolution is reached after the 30-day period, the IRS may instruct the taxpayer's financial institution to freeze and eventually remit funds to the IRS.

Solutions to an IRS Bank Levy

1. Pay the Tax Debt

The simplest way to stop a levy is to pay the full amount owed. However, this is not always feasible. Other options include:

2. Installment Agreement

Setting up an installment plan with the IRS allows taxpayers to pay their debt over time, often stopping the levy process. Form 9465 is used to apply for this arrangement.

3. Offer in Compromise

This option allows taxpayers to settle their tax debt for less than the full amount owed. The IRS considers several factors such as the taxpayer’s ability to pay, income, expenses, and asset equity (see IRS Form 656).

4. Prove Financial Hardship

If a taxpayer can demonstrate that the levy causes undue financial hardship, using Form 433-A or Form 433-F, the IRS may release the levy.

5. Request a Collection Due Process Hearing

This involves formally disputing the levy and requesting a hearing. This step can delay the levy while the IRS reviews the taxpayer's circumstances.

6. Seek Professional Assistance

Taxpayers are encouraged to consider professional help from tax attorneys or enrolled agents who can negotiate and deal with the IRS effectively.

Conclusion

Dealing with an IRS bank levy notice is complex and requires timely action. Understanding each step in the process and the available solutions can help mitigate the impact of such levies. For personalized assistance and further inquiries, visit our dashboard for professional help.

FAQs

• What triggers an IRS bank levy?

  A bank levy is triggered by unpaid tax debts and follows a series of notices and demands for payment sent by the IRS.

• Can a bank levy be reversed?

  Yes, a levy can be reversed if the taxpayer acts quickly to resolve the issue by paying the debt, setting up a payment plan, or proving financial hardship.

• What is a Collection Due Process (CDP) hearing?

  A CDP hearing is an opportunity for the taxpayer to dispute the levy and present their case for alternative resolutions.

• How long does a bank levy last?

  A levy can continue until the debt is paid or resolved through other arrangements with the IRS.

• Will the IRS take all the money from my account?

  The IRS can seize funds up to the amount of the tax debt, but they must follow legal processes. Notifying the IRS of hardship can sometimes protect the funds.

• Can an installment agreement stop an IRS levy?

  Yes, establishing a payment plan with the IRS can stop collection actions, including bank levies.

• Is professional help necessary?

  While not mandatory, professional help can significantly improve a taxpayer's chances of successfully negotiating terms that ease the levy impact.