How to Release an IRS Bank Account Levy: Stopping a Tax Bank Levy
The IRS will give you 30 days notice prior to starting the levy process. In these 30 days the IRS expects you to pay your taxes in full or come up with some other arrangement to settle or pay your taxes. If no action is taken within these 30 days the IRS will then figure out the best plan of action for them to levy your assets. The IRS can legally levy just about anything you own (with a few exceptions). One of the IRS’s preferred methods of levying a taxpayers assets is through a bank account levy. With a bank account levy you will not be given any notice by the bank or the IRS that your account is going to be levied. You can expect this to happen sometime after the 30 days have passed since you received the “Final Notice of Intent to Levy”. The IRS will contact your bank and require them to freeze your account. Once your account is frozen the IRS will have to wait 21 days until they can seize the funds from it.
In order to stop an IRS bank account levy you will have to either take action during the 30 days after the “Final Notice of Intent to Levy” is sent or in those 21 days since the IRS has frozen your account. Time is not on your side and if the IRS ends up seizing your funds from your account you will not get that money back since it will be applied to what you owe the IRS. It is important that you act quickly if you do not want the IRS to take your money. Below are some methods that can be used to stop the levy.
Ways to Stop or Release an IRS Bank Account Levy
Pay the IRS everything that is owed plus interest and penalties
Once you pay off the entire amount of taxes the bank levy will be removed and you will have full access to your funds again. Even if you can’t pay your taxes in full you can consider borrowing from family and friends, getting your employer to pay you early on something, refinancing your home (which you may not have time to do with a bank levy) or quickly sell another asset to come up with the funds to pay in full. This will be the quickest way to get the levy removed. Other methods will take some time and planning.
An installment agreement allows the taxpayer to pay back their taxes in monthly increments instead of paying them all at once. The IRS can be a bit hesitant to allow you to do this if you do not make a reasonable monthly payment amount or if you have a prior record of defaulting on these types of agreements. Once your installment agreement is accepted by the IRS the bank account levy will be released and funds will not be seized. You will remain in good standing with the IRS as long as you don’t default on monthly payments. The IRS can reissue the levy if an installment agreement is defaulted on.
An offer in compromise allows you to settle taxes owed for a fraction of the total. This method is frequently denied by the IRS. The IRS only accepts this type of filing for those taxpayers that are truly deserving of this form of tax relief. This method should not be used as a method of stalling the IRS because it will only get you in more trouble with them. If the IRS officer that you are dealing with really believes that you may meet the requirements for this form of relief he may release the levy until further review of your tax filing.
The IRS typically shows little remorse for taxpayers when they seize assets. The IRS will not check to make sure you will have enough money left to pay your other required bills before they take your money but if you prove it to them then it is a different story. This is one of the most common methods used to stop a bank account levy. This does not solve your tax problem it just postpones government action and buys you some more time to settle or pay your taxes in another manner. In order to prove this to the IRS you must be ready to show that the levy could effect your health and well being and will limit your ability to put a roof over your head and provide your family with money.
No matter what method you choose it is important that you act quickly. Once you find out your bank account has been frozen you have a maximum of 21 days before the IRS seizes the funds in that account. It is highly suggested that you work with a tax professional to resolve an IRS bank levy. A tax professional can quickly assess your financial and tax situation to come up with the best course of action. The tax professional can then act on your behalf to work as quickly as possible to limit the effects of the bank levy and resolve your tax problem.