Owing a tax debt to the IRS can place you in a difficult position that may seem like it has no way out. You may have heard of some people being subject to a bank levy when they owe an outstanding tax debt to the IRS. Let us take a look at what a bank levy is and what it is not.
Understanding Bank Levy
Bank levy, simply put, is a collection effort made by the IRS in order to get repayment of back taxes. It is one of the most common types of levies enforced by the IRS. The IRS cannot, however, simply put a bank levy in place. There is a process that must be followed.
The process begins by the IRS sending you a Notice and Demand for Payment. This notice lets you know the particular amount you owe in back federal taxes. The amount includes any interest accrued on the debt as well as any penalties assessed against you by the IRS due to your outstanding tax debt. You have the option to pay this amount owed, but, of course, many people are unable to do this, which is the reason for the problem to begin.
Should you be unable to pay the debt amount set forth in the Notice and Demand for Payment, the IRS will grant you a 30-day levy notice referred to as a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” During this 30 day period, you have the opportunity to pay back the IRS for what you owe. Again, many people are unable to do this. Without a response to the notice or efforts to resolve this issue, the IRS may choose to issue a bank levy.
When a bank levy is issued, the IRS places a hold on your bank account. The freeze on the account allows the IRS to seize funds held in the account in order to pay off your tax obligation. Once the hold on your account is put in place, you have no more than 3 weeks, or 21 days, to pay the IRS what is owed.
During the 21 day period before the IRS starts clearing your bank account, you have several options to stop these collection efforts. You may be able to pay off the debt. In the alternative, the IRS may allow you to go on a repayment plan so that you can work to pay off your debt in a more manageable way. You may also request a collection due process hearing to assert that the IRS should not issue a bank levy due to a reason such as the taxes were assessed while you were in bankruptcy proceedings, or there was a procedural error in the taxes being assessed.
You may also be able to claim that paying the tax debt would create an undue financial hardship and thus should be declared uncollectible by the IRS. In the alternative, you may seek an offer in compromise. While a selective IRS program, an offer in compromise will allow a taxpayer to satisfy a tax obligation for less than the amount that is actually owed.
Tax Attorneys
Owing a tax debt to the IRS can get out of control fast. Talk to the trusted attorneys at Regal Tax & Law Group, P.C. about your options. Contact us today.