IRS Bank Levy: Top 5 Ways to Stop Bank Account Garnishment

When you own the federal government money in back taxes that you can’t afford to pay, the IRS may take progressive action against you to recover the cash including actions such as a bank levy. The IRS will give a taxpayer 30 days after notice to settle up on your taxes. If a taxpayer fails to make an arrangement for payment, the IRS can legally levy almost any of your assets. A bank levy is the most common tactic used by the IRS to settle tax debts. Your bank accounts will be frozen. The IRS will have to wait a period of 21 days before they can take the bank funds but during a freeze you will not have access to your money.

There are ways to halt a bank levy including settling your tax debt within the 30 day time frame. You can also do one of the following to stop the IRS from seizing your bank assets within the 21-day time period before the IRS can legally take your money:

1) Enter Into Installment Agreement

The IRS offers an Installment Agreement which taxpayers can use to make monthly payments on their tax balance. You may not get the option of an installment agreement if you have a history of defaulting on previous agreements or if you can not commit to making a reasonable payment amount each month. If the IRS accepts the Installment Agreement you propose, the bank levy can be stopped and your funds will not be taken. Provided you make all payments as outlined in the Installment Agreement, the IRS will consider you to be in good standing. If you default on the agreed-upon payments, you may again be subjected to a bank levy or other legal action.

2) Offer in Compromise

The IRS has an option that allows taxpayers who can not reasonably afford to pay off the debt in full to settle the debt for less than what they owe. This practice is called an Offer in Compromise. While it is an option, know that the IRS frequently denies taxpayers the ability to settle for less. Only those who need this type of tax relief are granted permission. The IRS will make the determination for individuals who file for an Offer in Compromise and it should not be used as a way of stalling the government or avoid paying taxes. Doing so can get you in further trouble with the IRS.

3) Hardship/Uncollectible

The IRS can legally take most of taxpayers’ assets in an effort to get money owed. If you can prove you are a hardship case, the IRS may be more lenient. You must be able to show the IRS that a bank levy can essentially affect your well-being and health and disrupt you from providing for the basic needs of your family. A hardship approval will not erase your tax debts but it will buy you some time to settle your tax problems with other options. This is the most common form of relief taxpayers’ use against stopping a bank levy.

4) Appeal Bank Levy

If you do not agree with the determination by the IRS on a bank levy against you, you have the right to ask an IRS manager to review your case. You can also request a Collection Due Process hearing with the Office of Appeals by filing a request with the office listed on your notice letter. You must file a request for appeal within 30 days of the date listed on your notice. After the hearing, the Office of Appeals has to make a determination in your case. You have an additional 30 days to bring a suit to contest an appeals determination you do not agree with to resolve the matter.

5) Innocent Spouse Relief

For taxpayers that file jointly, each spouse has equal liability for all taxes, penalties, and interest owed to the IRS. Even if a couple is divorced, the IRS can legally pursue both parties for the total tax amount owed. There is an option called Innocent Spouse Relief through the IRS that offers protection against unfair collections. In the event a spouse has filed taxes incorrectly by understating the amount of taxes owed, the other spouse may be relieved of the burden of the debt if they qualify.