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IRS Levy Release Helpdotcom |
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IRS Bank Levy Release |
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Doesn't IRS know where all of my money is, anyway? IRS doesn't have as much power as most people think. And even though they know a lot, they don't know everything. Assume that on August 15 you have accounts at three different banks. Also assume that no one has told IRS about your bank accounts unless legally obligated to do so. For ten years now, you've had a plain old ordinary run of the mill average no frills checking account at First Bank. Your balance is currently $1,000. At Second Bank you have one of those special checking accounts that pays you interest and has no monthly service charge if you maintain a balance of at least $250, which you do - but barely. You've had this account for two years and right now your balance is $275. At Third Bank, in February of this year, you opened a savings account with a $5,000 deposit. Third Bank pays interest monthly and you've been paid about $50 in interest so far this year. You've had no other transactions in this savings account since then. You owe IRS $17,000 for some back taxes and they want to send a Notice of Levy to every bank they know about. Can you name which bank(s) will receive an IRS Levy and how much money will be affected? The answer is below. Banks are not legally obligated to report all of their account holders to IRS. Banks are legally obligated to report any interest they pay to any of their account holders, though. Therefore, since First Bank paid you no interest from the time you opened your checking account with them ten years ago, IRS doesn't know about your account at their bank and won't send a Levy Notice to it. Second Bank, however, paid you a little bit of interest last year and was required to send you a 1099 that reported that interest income. They also had to send a copy of the 1099 to IRS in January of this year. So IRS knows about this bank account and will mail it an IRS Levy Notice. Third Bank has paid you some interest this year. But they didn't pay you any interest last year because you didn't have an account with them until February of this year. Therefore, they haven't sent IRS a 1099 to report any interest paid to you since they won't be required to do so until January of next year. So IRS only knows about your account at Second Bank and will get $275 if you don't get a Bank Levy Release in 21 days. |
If IRS knows where your bank account is located, or if you or anyone else tells them where it is, they can also levy your bank account and take whatever money is in the bank.It doesn't matter whose money it is, either. As long as your Social Security Number is attached to the account, the bank is required to hold the money for IRS. By law, the bank must hold the funds for 21 days before sending them to IRS. This holding period gives you time to try to get IRS to "let you have it back." In all sincerity, even with our years of experience and knowledge of the IRS System, we find it extremely more difficult to get an IRS Bank Levy Release than it is to get an IRS Wage Levy Release. Why? Well, keep in mind that IRS must follow those two little rules we keep mentioning about ordinary and necessary expenses and undue economic hardship. IRS has its own precise definitions of these terms and those definitions tend to favor You Know Who. The Official IRS Opinion is this: Any money you have laying around in a bank account is extra money that you don't need for ordinary and necessary expenses. Otherwise, you'd have already spent it on those expenses if they were so ordinary and necessary. In spite of the fact that you may have $1,000 in outstanding checks that are going to bounce; regardless of the fact that you really do need to go to the supermarket as usual on Tuesday; so what if today is the 16th and your paycheck was just deposited yesterday and they got all your money; too bad that your 1973 Plymouth is in the shop and it's going to cost you $1,250 to replace the radiator and the fuel pump and 8-track player. That's extra money just sitting right there in your bank account and it isn't ordinary and necessary or you would have already ordinarily and necessarily spent it! IRS says that in order for them to give you any of that money back ......... they want to see an eviction notice or some utility shut-off notices. We're not making this stuff up, either. For some unknown reason, IRS simply considers money in the bank as unnecessary. IRS reps on the phone invariably tell us, "well, you know we won't give you a Bank Levy Release." However, our experience has been that we can get an IRS Bank Levy Release from them, but only after a lot of hard work. How Much Of My Money In The Bank Is Affected? As an example, let's say that on the 30th of the month you have a checking account balance of $200. The next day, the 31st, is payday. Let's say you deposit your $1,800 paycheck into your bank account. That gives you an even $2,000. The day after that, the 1st of the month, your bank receives in the mail a Notice of Levy with your name and Social Security Number on it as well as your spouse's name and Social Security Number (because you filed some tax returns as Married Filing Joint). The levy covers three years for a total amount of $9,500. By law, your bank must now freeze everything in their bank with your and/or your spouse's Social Security Numbers tied to them up to that $9,500 amount that you owe. So suddenly, your checking account balance is zero. Zip. Nada. Nothing. Cheerio without the Cheeri. The big "Oh". That check you just gave to apartment manager or landlord or mortgage company? The bank will send it back marked NSF. That night you might be sitting at a cozy table for two in a romantic restaurant when the waiter tells you, "your card was denied." The check you mailed to make the payment on your car? NSF. You get the picture. Your bank will hold your $2,000 for 21 days before sending it to IRS. That means you have 21 days to convince IRS to give you that money back (or any part of it) so that you can pay bills and buy food and diapers and glasses and $2.15 per gallon gasoline and Starbuck's latte. And 21 days never went faster in your life. But in the midst of all your panic, there is a bit of good news. That levy only affected your money in the bank on the day the bank received the Notice of Levy. You can continue to deposit additional money into that bank account and have free and clear access to it without IRS intervention. As soon as the day after the bank received the Notice of Levy, the 2nd of the month, you can take some of your Vacation Stash out of your sock drawer and put it in your checking account and IRS won't get it. IRS isn't in the habit of sending out a second Notice of Levy anytime soon to the same bank. In 15 years of dealing with IRS Levies, we haven't seen successive levies sent to the same bank. And guys, read this carefully. If you are married and owe taxes on any year(s) where you filed Married Filing Joint with your wife and right now your wife has a separate checking account and/or a separate savings account and/or a separate "Just For Me" account, and you have two minor children with savings accounts that have your (or your spouse's) Social Security Number attached to them, or you have a $5,000 CD at the bank that will mature in two months that you were planning on using to pay for a vacation ............... tough luck. Your bank must freeze every dime in their vault that has a Social Security Number attached to it that matches any of the Social Security Numbers on that IRS Levy. Up to the $9,500 that appears on the IRS Levy. That means all of the accounts at the bank that are tied to your Social Security Number(s), even if you are just holding some money for a friend or a relative. Be wise and prudent when it comes to protecting your money and your family's well-being. Take the measures necessary to ensure that you are taking good care of the ones you love.
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How Much Information Are You Required to Disclose to IRS? Every time you talk to IRS, you will be expected to provide them with current, updated, and accurate information. There is nothing wrong with IRS updating their records. In fact, it's in the best interest of our country that they have accurate information on all of us. But the question to be addressed here concerns your obligation to give information that can be used against you and to your detriment. Just as IRS representatives have the freedom to ask you pretty much any question, you likewise have the freedom not to answer those questions. You can politely inform the IRS representative who asks the questions that the purpose of your call is only to gather additional information and that nothing has changed since your last conversation. However, please keep in mind that IRS possesses the ability to gather lots of information about you in totally legal methods Please, in all of your conversations with IRS personnel, be polite and respectful. The reps you talk to are normal people just like you - they just happen to work for an organization that has a bad reputation. We talk to IRS all the time and have found that a mutually respectful relationship is best under all circumstances. You can very politely answer any question with a reply like "I would really rather not discuss information that has not changed since our last conversation and I am only calling to get information from you that will help me file tax returns or make payments or prepare for future discussions.
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