IRS Bank Levy FAQ
Q. How am I notified about a bank levy?
A. The IRS will mail you a copy of the original Notice of Levy that was sent to your employer or financial institution. Many taxpayers find out about a bank levy first either from their bank or employer.
Q. What should I do after my bank account is levied?
A. You should immediately get proper representation prior to any IRS contact. The tax professionals at Instant Tax Solutions are experts in IRS negotiations. Attempting to deal with the IRS on your own can lead to less than favorable results.
Q. How long does it take to release a levy?
A. It depends on the situation. Most bank levies can be released in 1-2 business days. Exceptions are:
- Your case has been assigned to a Revenue Officer
- Your case has been placed in the Large Dollar Unit for balances over $100,000
- You are not compliant in the filing of past due tax returns
Q. Do I get a warning before the IRS issues a levy?
A. Yes. The IRS is required to send a Final Notice of Intent to Levy to your last known address. If you no longer live there, you may not receive it.
Q. Can the IRS levy Social Security?
A. Yes, up to 15% of each payment.
Q. Can the IRS levy state tax refunds?
A. Yes, if your state participates in the State Income Tax Levy Program (SITLP).
Q. What property is exempt from IRS seizure?
A. The most common are:
- Certain clothing (does not include mink coats or other luxury couture)
- Fuel, provisions, furnishings, and personal effects worth up to $7,430 in total
- Tools of your trade and books up to $3,710
- Books for school
- Benefits for unemployed individuals
- Worker's Compensation payouts
- Certain funds received as public assistance
- Benefits from job training
- Child support as ruled by the court (if the judgment is dated prior to the levy)
- Certain deposits made to the Special Treasury fund by members of the Armed Forces and Public Health Service employees
- Some disability payments
- Minimum exemption amount of wages, salary and other income
- Welfare or SSI payments
Q. How do I prevent futures levies?
A. The only surefire way to avoid an IRS bank levy is to permanently resolve your tax debt. Instant Tax Solutions can help you efficiently accomplish this.
Q. How does the IRS know what bank accounts I have?
A. The IRS is aware of only those bank accounts that earned interest in previous tax years. Banks are legally obligated to report to the IRS any interest paid to their account holders. Your bank will send you a copy of the 1099 Interest Income report at the beginning of the year. Therefore, if your bank account does not earn interest, the IRS probably does not know about it.
If you have submitted a financial statement to the IRS when entering into an Installment Agreement, all bank accounts listed will be known and subject to an IRS bank levy.
Q. Are joint accounts subject to bank levies?
A. Yes. The IRS can issue a bank levy to any account attached to the tax debtor's social security number, even if the funds are not theirs.
The IRS will release the levy if the delinquent taxpayer can prove that the funds are not theirs, and that the funds in the account are not commingled.
Q. Are my IRAs protected?
A. No. However, the IRS will only levy IRA's as a last resort since liquidating the IRA early will create a taxable event.
Q. What is the difference between a tax levy and a tax lien?
A. A tax levy allows the IRS to actually take y0ur wages, bank accounts and personal property to pay the taxes owed. A federal tax lien is a claim against your assets and will show up on your credit report.