If you have ever filed your federal income taxes with the Internal Revenue Service (IRS) and you owed money, you may have wondered to what extremes the IRS will go to in order to collect the money they are owed. Specifically, you may have wondered if they could actually take money from your checking and savings accounts.
The short answer is a simple yes. If you owe money to the IRS and you do not pay it, the IRS has powerful levy authority against your personal property. An IRS levy is when the IRS seizes your property to sell it or otherwise use it to satisfy a tax liability. The property the IRS can seize includes your checking accounts, savings accounts, and any other accounts held with a bank or a similar entity.
But the IRS will not begin to exercise their levy authority until they have taken various steps, including giving you sufficient warning. These steps include:
- Sending you a Notice and Demand for Payment
- Noting that you have failed to or flat out refused to pay the tax
- Providing you a Final Notice of Intent to Levy
Once you have received the Final Notice, the IRS can begin to seize your personal property after 30 days.
If you want to prevent the IRS from seizing your bank accounts, you must act before they actually take the money. Once the IRS has seized your bank accounts, it is very difficult to get the money back. Therefore, you should take action sometime between when you receive the Final Notice of Intent to Levy and the end of the 30-day waiting period.
The primary steps people can take to stop the IRS from seizing your bank accounts include the following:
Pay the IRS all of the money you owe. This may generally be the worst option for the taxpayer, as it is as stated paying the IRS everything you owe, but it is a valid method of avoiding a levy. It is often not an option for those who have received a Final Notice of Intent to Levy, because if you have the money to pay the IRS in full, you likely would have simply paid the IRS to start with.
Negotiate an installment agreement or offer in compromise with the IRS. The IRS offers both installment agreements and an offer in compromise as options to extend the timeframe over which you have to pay the tax due. These are good options when you can afford to make a monthly payment but simply cannot pay the full balance due right now.
Prove that seizing your bank account would cause financial hardship. If you can prove that the IRS seizing your bank account would cause financial hardship, the IRS will temporarily suspend their collection efforts. But they will generally not forgive the tax liability, so expect that with this option the IRS will contact you in the future to resume collection efforts once the hardship has passed.
If I owe money to the IRS I cannot pay, how can I get help in arranging one of the above options?
If you find yourself in a situation where you cannot pay your federal income tax, you should hire a tax attorney. A tax attorney will have the training and experience needed to objectively evaluate your tax situation and advise you on what settlement or payment options the IRS makes available that will work best for you.
If you complete the short form below, you can get started by having a tax attorney review your circumstances free of charge. While this review is completely confidential and does not obligate you to anything further, it will give you the opportunity to hear firsthand what a tax attorney can do to help in your situation. You can also then hire the attorney to guide you through the entire process of negotiating your tax liability with the IRS. So please complete the form to get started today.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.