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What You Need to Know

The federal government has various tools at its disposal for collecting unpaid tax debts, and the IRS bank levy is one of the most formidable. This isn’t something to be taken lightly, as it can lead to significant disruption in your financial life. Whether you’re currently facing this issue or avoiding it in the future, understanding IRS bank levies is beneficial.

If you’re struggling with the stress and financial burden of an IRS bank levy, don’t face it alone. Ronald Arthur Stearns Sr. PLLC is here to help you regain control of your finances and find a solution that works for you. With nearly three decades of experience in tax law and litigation, we are committed to providing the support and guidance you need. Take the first step towards resolving your tax issues by calling us today: if you are in Texas, please call 1-512-257-0570 and if you are in California, please call 1-949-676-7193. Let us help you find peace of mind and protect your financial future.

What Is an IRS Bank Levy?

An IRS bank levy is a legal action taken by the Internal Revenue Service to seize money from your bank account to cover unpaid tax debts. It’s a part of the Internal Revenue Service’s ways of enforcing tax laws and satisfying outstanding tax bills. When you hear the terms “IRS levies” or “tax levy,” know that they represent the government agency’s right to legally seize your assets without your consent to settle your tax liabilities.

IRS bank levies are a direct indicator that the IRS is not only aware of your unpaid tax bill but is also taking decisive action to recover the amount owed. This process doesn’t begin out of the blue; it’s the culmination of a series of attempts by the IRS to collect what’s due and a reminder that ignoring tax obligations can lead to serious financial consequences.

Can the IRS Take Money from My Bank Account Without Notice?

There’s a common misconception that the IRS will take money from your bank account without any warning. The truth is that the IRS follows a protocol before proceeding with a bank levy. Before the IRS can dip into your bank accounts, it must first assess the tax, send a Notice and Demand for Payment, and allow you to pay the debt. Only if you neglect or refuse to pay, does the IRS move forward with the bank account levies.

The process doesn’t occur overnight. If you’ve overlooked the IRS’s previous communications, you may find yourself surprised when the bank levies occur. Should the IRS find your bank accounts, they will issue a levy that instructs your financial institution to withdraw funds to cover your unpaid tax bill. This is why it’s important to address any notices from the IRS immediately to prevent intrusion into your bank accounts.

How Does the IRS Notify You Before a Levy?

The IRS’s approach to notifying you of a potential levy is methodical and structured. A Final Notice of Intent to Levy is sent to you at least 30 days before any action is taken. This notice can be delivered in person, left at your home or business, or mailed to your last known address, ensuring you have every opportunity to become aware of the impending action. It’s the IRS’s way of giving you one last chance to settle your tax debts before they proceed with enforcing the levy.

When you receive this notice, it’s the moment to act. With the right to request a Collection Due Process (CDP) hearing within 30 days, it’s your opportunity to discuss the matter with the IRS and negotiate an alternative solution. Ignoring this notice could lead to the IRS taking the next step: freezing your bank accounts and ultimately seizing the funds needed to satisfy your tax obligations.

What Happens When Your Bank Account Is Levied?

Once the IRS issues a bank levy, the bank is required to freeze the funds in your account. This doesn’t mean your money is gone immediately. There is a 21-day period during which the funds are held, giving you a window to engage with the IRS and explore options for a resolution.

This period is your last chance to negotiate with the IRS, whether that’s to release the levy due to significant financial hardship or to establish a payment plan. If no agreement is reached within these 21 days, the bank will remit the funds to the IRS, and any money deposited after that time is safe from that particular levy. However, this does not protect you from future levies on subsequent deposits.

What Assets Can the IRS Legally Seize?

When it comes to satisfying tax debts, the IRS has the authority to cast a wide net over your assets. Bank accounts are a common target, but they’re not the only source of funds at the IRS’s disposal. Your wages can also be garnished, meaning the IRS can require your employer to redirect a portion of your paycheck directly to them. Additionally, the IRS can exercise a Notice of Levy to seize and sell properties such as vehicles, real estate, or any other valuable assets you may own to cover your unpaid tax bill.

Beyond these more familiar forms of income and assets, the IRS can levy other financial resources such as:

  • Social Security benefits
  • Retirement income
  • Dividends
  • The cash loan value of life insurance policies

The IRS will utilize various means to recover tax dollars owed, emphasizing the importance of addressing your tax liability promptly to avoid these aggressive collection actions.

How Does the IRS Locate Your Bank Accounts?

You may wonder how the IRS even finds out where you bank. There are several methods at their disposal, and they are quite adept at tracking down your financial information. One of the primary ways is through your previous tax returns, where you may have reported your bank account number for a requested direct deposit of your tax refunds.

Transactions like automatic clearing house (ACH) transfers also leave a trail. If you’ve ever authorized a direct debit for tax payments or received tax refunds via direct deposit, the IRS may use this information to locate the bank accounts belonging to you. Additionally, the IRS can use your Social Security number to uncover any bank accounts linked to you.

The IRS can find bank accounts through a combination of these methods. Understanding how the IRS can find bank accounts can serve as a cautionary tale about the transparency of your financial dealings with government agencies.

How Many Times Can the IRS Levy Your Bank Account?

One of the more unnerving questions you might have is, “How often can the IRS reach into my bank account?” While the IRS can levy your account numerous times, they typically won’t do so every day. There’s no explicit limit on the number of levies, but they are confined within a 10-year period that the IRS has to collect on tax debts. This means that as long as your tax debt remains unpaid and within the statute of limitations, the IRS can issue multiple levies on your bank accounts.

A levy on your bank account is not a continuous process. Once the IRS issues a levy and the funds are taken, they do not maintain a standing order on your account. Consequently, after a levy is processed, you are free to deposit money into your account without the immediate threat of another levy. However, this should not be misconstrued as an end to potential future levies if the underlying tax issues remain unresolved.

3 Steps to Release an IRS Bank Levy

Upon facing an IRS bank levy, you might feel cornered, but there are several steps you can take to release it. Here are some options:

  1. Pay off your tax debt entirely, which will prompt the IRS to lift the levy.
  2. If full payment isn’t possible, negotiate an installment agreement or another arrangement that better suits your financial situation.
  3. The IRS is open to solutions that will ultimately lead to the collection of the owed tax dollars.

If the levy is causing you significant financial hardship, the IRS is legally obligated to release it. You’ll need to provide evidence of your financial condition, and if the IRS agrees that the levy is preventing you from meeting basic living expenses, they may release it. Additionally, if you believe the levy was issued in error or the statute of limitations on the tax debt has expired, you have the right to appeal the IRS’s decision.

Our team at Ronald Arthur Stearns Sr. PLLC can assist you in gathering the necessary documentation and presenting a compelling case to the IRS. We are committed to helping you regain access to your funds and bring your tax troubles to a close.

How to Prevent Future IRS Bank Levies

A pile of one dollar bills. If you need help with debt relief contact an Austin Tax attorney today.

There are proactive measures you can take to prevent IRS bank levies from happening. Addressing your tax issues promptly and making sure to pay tax bills on time is the first and foremost step towards ensuring you don’t face another levy. Keeping open lines of communication with the IRS is also essential; it informs them that you’re aware of your tax obligations and are willing to work towards a resolution.

Requesting an extension or entering into an installment agreement can also go a long way in preventing future levies. And don’t underestimate the value of professional guidance. Engaging with tax law professionals like Ronald Arthur Stearns Sr. PLLC can help you with the often-confusing array of IRS procedures and requirements, ultimately safeguarding you against future tax levies.

Ronald Arthur Stearns Sr. PLLC: How We Can Help

At Ronald Arthur Stearns Sr. PLLC, we offer the following services:

  • Tax dispute resolution
  • IRS bank levy assistance
  • Legal support and experience in tax law
  • Nearly three decades of experience in litigation and tax law

Our mission is to provide you with the necessary support to resolve tax disputes and achieve peace of mind. We understand the distress and uncertainty that come with these issues and are here to help.

Our services extend beyond just responding to IRS actions; we empower you with strategies to settle or reduce your tax liabilities, often for less than the full amount owed. If you’re ready to take the next step towards financial freedom, we invite you to reach out for an initial consultation – if you are in Texas, please call 1-512-257-0570 and if you are in California, please call 1-949-676-7193.

Frequently Asked Questions

Can the IRS levy my joint bank account if my spouse owes back taxes?

Yes, the IRS can levy a joint bank account even if only one spouse owes back taxes. This is because both account holders have equal rights to the funds in the account. However, you may be able to argue that some or all of the funds belong to the non-debtor spouse, potentially reducing the amount levied.

What should I do if I receive a Notice of Intent to Levy but can’t pay the full amount?

If you receive a Notice of Intent to Levy and cannot pay the full amount, it’s crucial to contact the IRS immediately to discuss your options. You may be eligible for an installment agreement or an offer in compromise, which allows you to settle your tax debt for less than the full amount owed. Additionally, you can request a Collection Due Process (CDP) hearing to contest the levy or negotiate a payment plan.

Can the IRS levy my retirement accounts, such as my 401(k) or IRA?

The IRS does have the authority to levy retirement accounts, including 401(k)s and IRAs, to satisfy unpaid tax debts. However, this is generally considered a last resort due to the financial hardship it can impose. Before levying retirement accounts, the IRS will typically exhaust other collection methods and provide you with ample notice and opportunities to resolve your tax debt.

Is there a way to stop a bank levy after it has been issued?

Once a bank levy has been issued, there are still steps you can take to stop it. You can contact the IRS to negotiate a payment plan or demonstrate that the levy is causing significant financial hardship. Providing evidence of your financial situation or proposing an alternative solution can sometimes lead to the release of the levy.

What happens to my bank levy if I declare bankruptcy?

Declaring bankruptcy can temporarily halt IRS collection actions, including bank levies, through an automatic stay. However, this stay is not permanent, and the IRS may resume collection efforts once the bankruptcy process is complete. Depending on the type of bankruptcy filed, you may be able to discharge some or all of your tax debt, but this varies based on individual circumstances and the specifics of the tax debt in question.

If you owe money to a debt collector, the federal government, or another financial institution, the last thing you want is for them to take the money directly from your bank account. However, debt collectors may garnish your bank accounts in Texas under certain circumstances. Bank account garnishments can cause significant stress and make it nearly impossible to pay your regular bills.

Debtors can wake up one day to find their bank accounts frozen, a long time after the debt collection lawsuit began. The most important thing with frozen bank accounts is to act fast. You may have time to recover some funds in your accounts before the Writ of Garnishment is finalized and your bank pays the creditors. Hiring an experienced debt collection attorney is the best way to protect your rights in these situations.

Ronald Arthur Stearns Sr. PLLC

If you have unpaid debts or unpaid taxes, the best thing to do is hire an experienced tax attorney immediately. Ronald Arthur Stearns Sr. PLLC can help you avoid garnishment by advising you on your legal rights, assessing whether you are eligible for federal benefits, and helping you set up a payment plan that works within your financial means.

Ronald Arthur Stearns Sr. PLLC works on behalf of Texas taxpayers to protect their rights and ensure that fair debt collection practices are upheld. He has over 26 years of experience fighting aggressively for taxpayers’ rights and he has gained significant experience and accomplishments throughout his years of practice.

He personally handles every case that comes into his office and he offers tailor-made legal strategies for all of his clients. When your personal finance is at risk, it is important to have a tough legal representative by your side.

Call our law firm today for an initial consultation at 210-853-2135.

Understanding the IRS Tax Levy Process

A tax levy is a legal procedure through which the IRS seizes assets, including funds from bank accounts, to satisfy unpaid federal tax debts. While it may be unsettling to contemplate the IRS accessing bank accounts without explicit authorization, it’s essential to recognize that this process follows a set of established procedures.

  1. Notice of Tax Debt: The initial step in the process is the issuance of a notice from the IRS to the taxpayer, detailing the amount of federal tax debt owed, including any associated penalties and interest. This notice serves as an essential communication channel between the IRS and the taxpayer, alerting them to the debt and its implications.
  2. Notice of Intent to Levy: If the taxpayer does not respond to the initial notice or fails to make arrangements to address the tax debt, the IRS issues a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” This notice explicitly informs the taxpayer of the IRS’s intention to levy their assets, which includes their bank accounts. It is important to take prompt action upon receiving this notice to explore potential avenues for resolution.
  3. Collection Due Process (CDP) Hearing: The taxpayer has the right to request a Collection Due Process (CDP) hearing within 30 days of receiving the Notice of Intent to Levy. This hearing offers an opportunity for the taxpayer to engage with an IRS appeals officer and discuss potential options for resolving the tax debt before the IRS initiates any collection actions.
  4. Bank Levy: Should the taxpayer not request a CDP hearing or fail to reach an agreement with the IRS during the hearing, and if the unpaid tax debt persists, the IRS can proceed with a bank levy. The IRS contacts the taxpayer’s bank and issues instructions to freeze the funds in their account, up to the total amount of the tax debt. The bank is then required to hold these funds for a period of 21 days before forwarding them to the IRS.

It’s important to note that while the IRS holds the authority to execute a bank levy, certain exemptions and safeguards are in place to ensure that individuals have access to a minimum amount of funds to cover essential living expenses.

In most situations, a debt collector cannot take money from your bank account without authorization in Texas. However, you may not receive a notification straight away that a bank levy has been placed on your account. Often, people discover they have a levied account when they go to take money from their account and it is frozen.

This is because debt collectors are afraid the debtor will move the money out of their account before it can be taken. You will usually receive notification of the garnishment after your bank account has been frozen or if you contact your financial institution to figure out why your personal or business account is frozen.

A debt collector is required to send you a debt validation letter once they notify you of the debt. You then have a limited time to address the debt by contacting the debt collector and beginning repayment. If you do not address the debt within this time, they can sue you or your bank to garnish your account.

Because of this, it is important to respond promptly to any notification from a debt collector about an unpaid debt. If you do not take legal action to secure your assets, your bank accounts could be frozen without notification and a levy could be placed on your account.

Federal Debt

The exception to this rule is federal debt. If you owe money to the federal government, a government agency, or a federal debt collector, they can garnish bank accounts without authorization. If you owe unpaid child support, spousal support, or a federal student loan, the government may place a levy on your bank account without a court order.

With federal debt, the risks are high because debtors have fewer protections under the law. If you receive notification of unpaid federal debt, a Texas debt attorney can help you set up a payment plan and assess whether you can settle your debt for less than you owe. If you cannot pay your debt, you may be eligible for Currently Not Collectible (CNC) status or an Offer in Compromise.

Limits on a Bank Levy in Texas

Bank levy limits for unpaid federal taxes are governed by federal law, and these limits are not specific to individual states like Texas. However, there are certain exemptions and protections in place to ensure that you have access to a minimum amount of funds for basic living expenses. These protections are outlined in the federal law and apply regardless of the state you reside in. Here’s an overview of the key points to understand about bank levy limits:

  1. Federal Exemptions: Federal law provides exemptions that protect specific types of income from being levied by the IRS. These exemptions include certain federal benefits and payments, such as Social Security benefits, Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), veterans’ benefits, federal retirement benefits, and certain other government benefits.
  2. Standard Deduction and Allowable Exemptions: For funds in your bank account that are not covered by federal exemptions, the IRS uses a formula to calculate the amount that is exempt from being levied. This formula takes into consideration the standard deduction and the number of allowable exemptions you are eligible for based on your filing status. The exempt amount is meant to protect a minimum amount of funds for your essential living expenses.
  3. Notice and Opportunity to Appeal: Before initiating a bank levy, the IRS is required to provide you with notices outlining the tax debt, their intent to levy, and your right to appeal the levy through a Collection Due Process (CDP) hearing. This hearing allows you to present your case and explore possible resolutions with the IRS appeals officer.
  4. Financial Hardship Considerations: If a bank levy would result in financial hardship, you can present your case during the CDP hearing to request that the levy be released. The IRS may consider factors such as your income, necessary living expenses, and other financial circumstances when deciding whether to release the levy.

It’s important to note that tax laws and regulations can change, and it’s advisable to consult with a Texas tax attorney who is knowledgeable about the most current information. They can guide you through the specifics of bank levy limits, exemptions, and protections that apply to your situation. If you’re facing the possibility of a bank levy due to unpaid federal taxes, seeking professional advice can help you understand your rights and explore potential avenues for resolution.

Laws on Wage Garnishment in Texas

Similar to bank account garnishment, wage garnishment is when your incoming wages are used to pay back a debt. Wage garnishments happen before your wages go into your bank account. Your employer receives the notification of wage garnishment and they must follow the court order by taking money from your paycheck to pay back your unpaid debts.

In most situations, a creditor must notify you before garnishing your wages for unpaid debts. However, the IRS and some tax collection agencies may garnish your wages without notifying you. You should know of unpaid taxes or the original debt through mail notifications and warning letters. However, if you are unaware that you owed a debt and they begin to garnish your wages, contact a tax attorney immediately.

Although there are no limits on the amount of money creditors can take from your wages, they typically base their amount on the number of dependents that you have and your tax deduction rate.

Federal Tax Garnishment in Texas

If you owe unpaid federal taxes and the IRS determines that you have not made arrangements to pay your debt, they can take various actions to collect, including wage garnishment. Federal tax garnishment limits the amount of your wages that can be taken to satisfy the debt. The IRS follows a specific formula to determine the exempt amount, which depends on your filing status, number of exemptions, and your standard deduction.

Texas Garnishment Laws

Texas has laws in place that restrict wage garnishment for certain types of debts, including consumer debts like credit card debt and medical bills. However, these restrictions generally do not apply to debts owed to the government, such as unpaid taxes. Federal law, in most cases, supersedes state law when it comes to wage garnishment for federal debts, including federal tax debts.

Statute of Limitations on Bank Account Garnishment Texas

There is a statute of limitations on all debts owed in Texas. Creditors have four years to sue debtors for unpaid debts. Once this period has passed, they cannot legally sue you for the money that you owe. This means that they cannot garnish your bank accounts if the debt is older than four years.

Because debt collectors must file a lawsuit against a debtor for bank account garnishment, they cannot legally do this after four years and cannot threaten debtors with bank account garnishment after this time period. If they sue you to recover the debt after four years, you can use the statute of limitations as a defense strategy to avoid your accounts being garnished.

Fighting Against IRS Debt Collection in Texas

The prospect of having your bank accounts garnished because of unpaid debts is quite scary. Dealing with debt collectors can be extremely difficult, particularly if you are in financial hardship and have no knowledge of debt collection laws in Texas. The best way to fight against the practices of debt collectors is to hire an experienced tax attorney. If you owe a federal debt, they can assess whether you are entitled to federal relief or a reduction of your debt.

If your account has already been frozen because of unpaid debt, the first thing to do is contact your bank and find out why. If there is a judgment against you, you have a short time period to fight against the garnishment in court. An attorney can help you fight against it by challenging the debt and debt collector practices in court.

If you have personal assets that should be protected, like your primary residence and certain personal property, your attorney can submit a Protected Property Claim Form on your behalf. This will ensure that you do not lose access to personal assets and property because of unpaid commercial debts.

Contact Ronald Arthur Stearns Sr. PLLC Today!

Bank account garnishments cause significant financial strain for people with unpaid debts. When you go to an ATM one day and cannot withdraw money because your account has been frozen, it is extremely overwhelming. A debt collector cannot take money from your bank account without authorization. However, you may not receive notification of bank levies until after your account has been frozen.

Therefore, contacting a tax attorney as soon as you receive notification of debt is vital. The best way to avoid your bank account from being garnished is by dealing with the unpaid debt immediately. If you are in a difficult financial situation and cannot currently pay back the debt, an attorney can help you set up a fair payment plan and protect your personal property.

Ronald Arthur Stearns Sr. PLLC has spent over 26 years fighting for the rights of Texas taxpayers. Throughout his many years of practice as a tax attorney, he has gained a notable reputation for being an aggressive attorney. He understands the financial challenges faced by ordinary taxpayers and he wants to do everything he can to protect them.

Ronald Arthur Stearns Sr. has an A+ Better Business Bureau Rating (BBB) and has been recognized by the State Bar of Texas and the American Bar Association. His unique experience and skills are what you need to protect your assets against the tough practices of debt collectors.

Call our law firm at 210-853-2135 to schedule a consultation with a Texas debt collection attorney today!