During times of financial crunch, it is really not uncommon to fall behind on bills and debts that you owe. But, if you fail to keep up with your payments for longer than imaginable, you may face a bank levy, which is simply when the funds you have in your bank are “frozen” and are made unavailable to you.
If a creditor has the authority to establish the fact that you have an unpaid debt, be sure that they have the power to use a collection action known as a Bank Levy. Bank levies are the legal processes that creditors or the IRS use in order to collect unpaid debts. A bank levy can often be scary and intimidating for taxpayers.
A bank levy IRS enables the creditor or government agency to freeze the bank account of the person who owes the debt, withdrawing funds to finally pay the debt off. This is often scarier because it typically happens without the knowledge of the debtor, even though they are notified by their bank post the funds have been seized. But how does it actually work? And what exactly is it?
What is a Bank Levy?
While a bank levy does sound quite drastic as a step, creditors do have to jump through bundles of hoops to legally freeze your assets. In the beginning, the company or person you owe the amount to has to sue you in court and also win the case by the end. Once the judgment has been passed, the creditor finally becomes a judgment creditor who has the authority to place a bank levy on your accounts.
However, it is important to note that not all accounts are subjected to a bank levy IRS. Federal, civil service or railroad retirement benefits are typically exempt from any type of levy, meaning that they cannot be seized by the IRS.
It is important to realize that with IRS levies, you qualify to have your bank levy released in case you can demonstrate and prove that the loss of funds is causing you a potential economic hardship.
However, also keep in mind that the potential release of an IRS bank levy does not necessarily mean that your debt fully vanishes in thin air. This only means that your accounts are going to be unfrozen and you will further have to make arrangements with the IRS for beginning repayment of taxes you owe. Want to find a better solution for all your IRS problems? Get in touch with our tax consulting services!
How Does a Bank Levy Work?
Bank levies enable creditors to access your bank funds. Your bank is going to freeze funds in your account and mandate the bank to send the money to the creditors to pay off the debt in full. So, how does a bank levy work?
Here are a couple of things you should understand,
- Warning: The bank is going to freeze your account immediately after your creditor requests it, examining the circumstance further in detail. In cases like these, you might not receive any notification as well. Financial institutions can also offer contact information to the creditor in case you’re not very aware of who is levied on your account.
- Dispute Options: You must also be able to challenge the levy. You also equally have the authority to stop creditors from taking any amount from your account or reducing it.
Bank levies typically have less formal collection calls. In order to levy an account, lenders sue you to acquire court approval. Only in case they are successful in doing so, the cost then issues a monetary judgment stating the amount you owe. Following that, the state has the authority to dictate how the lender is going to collect money from your account. The bank then freezes your account immediately after the creditor offers the levy documents. The freeze usually remains in effect for about 21 days. Bank levies may stay until the full debt is paid or the levy is lifted. This is how does a IRS bank levy work.
How to Stop a Levy?
There are several ways to stop IRS levy, some include,
Pay Tax Debt in Full
The most efficient way to release a tax levy is by paying the IRS what you owe in full. In case you have financial hands, you should pay the obligation in fun, ensuring that your account has zero balance.
Appeal the Levy
You have a timeframe of 30 days from the time the IRS notified its intent to Levy an assent in order to make an appeal formally. This allows the appeal to temporarily stop until a decision has been made.
Instalment Agreement
In an instalment agreement, you can pay the regular monthly payments. Here, you can pay the amount in full, but on a monthly basis.
Offer in Compromise
If you are unable to pay the amount in full, there’s an option open for you. The option of Offer in Compromise still stays in hand. With an OIC, you can pay the amount but less than the amount originally owed. The IRS lets go of the remaining part of your debt if they accept your OIC.
Property Exempt From Tax Levies
The IRS 6334 explains what property is exempt from an IRS levy. Thus, the IRS levy exemptions are:
- Wearing apparel and schoolbooks
- Fuel, furniture, and personal belongings not to exceed an amount of $8,570
- Trade, business, or professional tools to not go beyond $4,290
- Unemployment benefits
- Undelivered mail
- Pension payments or annuity
- Compensation of workmen
- Child support grant
- Some exemptions for salary, wages and more.
- Service-associated disability payments
- Public assistance payments
- Job Training Partnership Act (assistance)
- Residences are exempt in cases if small deficiency, while a few business assets exempt in absence of approval or jeopardy
Does IRS take money from my bank account?
Technically, yes. Tax compliance generally combines the complexity of sophisticated laws with finances. But, can the IRS take money from your checking account? In reality, there are a couple of procedures that the IRS follows before initializing a levy. In case you don’t have debt, the agency can not take money from you.
So, can the IRS take money from your account?
In case you have a tax debt, the IRS can see the money from your account after sending a notice. During the span of 30 days, you still can resolve the issue at hand. The question “can the IRS take money from your bank account?” has generated a stir among the crowd.
Conclusion
A bank levy is one of the most stressful things that can happen to taxpayers. It is unnerving to have creditors seize funds from your bank account to satisfy all outstanding debts. It is a very serious matter since it can have a significant impact on the financial stability of an individual as well as the credit score and financial reputation. It is also equally important to note that a bank levy is not the first course of action that the IRS or other creditors are going to take.
In a bank levy, can the IRS take money from your bank? Truly, yes, but only if creditors have won the case they have sued you for and have the authority to issue a levy. They typically send an array of notices prior to issuing a levy. The best way to avoid the same is by paying any existing outstanding debt you have to take care of. A bank levy can be stressful and overwhelming but it is essential to remain calm and take appropriate action to resolve the outstanding debts. Get in touch with our tax advisory services and have a one-way solution for all issues!
