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Bank Levy: Insider Tricks To Stop One

By Keith L Jones, CPA TheCPATaxProblemSolver

Your Best Defense Against A Bank Levy

A Collection Due Process Hearing, also known as a CDP hearing, maybe your last best chance to resolve a tax controversy and stop a bank levy with the IRS short of tax litigation.

The IRS does not allow taxpayers to request these hearings for “frivolous” reasons. That includes refusing to pay tax on religious or moral grounds.

What Are Some Legitimate Reasons to Request a CDP Hearing?

  • You want to seek payment alternatives such as a payment plan or an offer in compromise. To get these plans accepted, you must file all delinquent returns.
  • You have a terminal illness and overwhelming medical bills.
  • You can’t pay because you’re living on Social Security or unemployment.
  • You can’t afford to pay with your income—the IRS has strict guidelines on this type of hardship arrangement.

Generally, the IRS must issue a Notice of Intent to Levy and Right to Request a Hearing before it sends a levy. Requesting a Collection Due Process Hearing
Complete Form 12153 Request for a Collection Due Process Hearing, and send it to the IRS at the address shown on the lien or levy notice within 30 days.

The taxpayer should check the IRS actions that he disagrees with and explain why he disagrees with such actions.

If the taxpayer receives both a lien and a bank levy notice, the taxpayer may appeal both actions.

The taxpayer must identify all reasons for disagreement, and may raise the following issues relating to the unpaid tax:

a. Appropriateness of collection actions;

b. Collection alternatives such as installment agreement, offer in compromise, posting a bond, or substitution of other assets;

c. Appropriate spousal defenses; and

d. The existence or amount of the tax, but only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability.

Bank Levy
A taxpayer may not raise an issue that was raised and considered at a prior administrative or judicial hearing, if the taxpayer was involved meaningfully in the prior hearing or proceeding.
  • To preserve the right to go to court, Form 12153 must be sent to the IRS within 30 days of receipt of the notice from the IRS.
  • Under CDP, a taxpayer is entitled to only one hearing relating to a lien notice and one hearing relating to a levy notice, for each taxable period.
  • If a taxpayer receives a subsequent lien or levy notice after requesting a hearing on an earlier notice, Appeals can consider both matters at the same time.
Unless the IRS has reason to believe that collection of the tax is in jeopardy, the IRS will stop bank levy action during the 30 days after the bank levy notice and, if the appeal is timely, during the appeal process.
Form 12153 will also suspend the 10-year collection statute of limitations until the date the determination is final or the taxpayer withdraws, in writing, the request for a hearing.
At the conclusion of the hearing, Appeals will issue a written determination letter. If the taxpayer agrees with Appeals’ determination, both the taxpayer and the IRS are required to live up to the terms of the determination.
Bank Levy
If the taxpayer does not agree with the Appeals' determination, the taxpayer may request judicial review of the determination by initiating a case in a court of proper jurisdiction (U.S. Tax Court or U.S. District Court, depending on the circumstances) on or before the 30th day after the date of Appeals' determination. Once the court rules, its decision will be binding on both the taxpayer and the IRS.
The Office of Appeals will retain jurisdiction over its determinations and how they are carried out.
A taxpayer may also return to Appeals if his circumstances change and impact the original determination. However, the taxpayer must first exhaust all administrative remedies.

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Frequently Asked Questions

What Is A Financial Institution (Bank Account) Levy?

A bank levy is an order from the IRS to seize money from a taxpayer's bank account. The levy can be in the form of all the money in the account or a certain percentage of it. The IRS is usually pretty aggressive in going after levies, so taxpayers should always try to reach out and negotiate with the agency if they're having trouble paying their taxes.

How A Bank Account Levy Works?

A bank levy is when a creditor seizes money from a debtor's bank account to satisfy a debt. The money seized can be used to pay the creditor directly, or it can be used to pay off the debt in full. If there's not enough money in the account to cover the entire debt, the creditor may seize whatever money is in the account, even if that means taking all of the money and leaving the debtor with an empty bank account.

The Federal Government has several options for collecting tax debts, including wage garnishment, asset seizure, and bank levy. Which option they choose depends on several factors, including how much money they think they can get from the debtor and how much hassle they're willing to go

Avoiding A Financial Institution Levy: What Can We Do?

Try to negotiate a payment plan with the IRS. They may be more willing to work with you if they know you're trying to make a payment plan and not just ignoring them. You may be able to avoid legal action and have taxes withheld from your paycheck if you pay off any outstanding debts before they become due.

How Long Does A Levy Stay On Your Bank Account?

A levy stays on your bank account until it's paid in full or released. A levy is a legal seizure of your property to satisfy a debt. The IRS can seize funds from your bank account, wages, or assets to pay your tax debt.

Posted in Articles, Tax, Tax Debt Relief, Tax Resolution

About Keith L Jones, CPA TheCPATaxProblemSolver

Keith L. Jones, CPA - TheCPATaxProblemSolver offers specialized Tax Resolution Services designed to assist businesses and individuals in overcoming complex tax challenges. With extensive experience in tax problem resolution, Keith L. Jones provides personalized strategies and solutions to alleviate tax burdens. Services include personalized tax consultation, tax debt relief strategies, expert audit representation, penalty abatement assistance, innocent spouse relief support, tax lien and levy resolution, offer in compromise guidance, and proactive tax planning and compliance. By choosing Keith L. Jones, CPA - TheCPATaxProblemSolver, clients receive dedicated support, reliable guidance, and expert representation to achieve financial peace of mind. Contact Keith L. Jones today to schedule a consultation and take the first step towards effective tax issue resolution.