Feb 24, 2009

My Bank Account is Frozen!

My bank account is frozen!!!!". I hear this often when talking to clients who have liabilities owed to the IRS and have failed to resolve the issue. This is why it is best to be proactive in resolving any tax issue, especially when there is a balance due or an amount owed. If you do not then the IRS will eventually begin to enforce collection through wage levies and/or bank account levies.

So what is a Bank Levy?

A bank levy is a seizure of the funds in your bank account on the day that the bank receives a levy notice from the IRS. More specifically, the bank must do the following as stated in the Internal Revenue Manual

1.The bank must send the amount in the taxpayer's accounts. However, it must send no more than the amount shown on the notice of levy.

2.The notice of levy only reaches the amount on deposit when the levy is received. Money deposited later is not surrendered, including deposits during the holding period. Another levy must be served to reach this money. Also, the levy only reaches deposits that have cleared and are available for the taxpayer to withdraw.

3.Levy proceeds must not be reduced by any fee charged by the bank for processing the levy.

What is the holding period?

1.A bank must wait 21 calendar days after a levy is served before sending payment. Then, on the next business day, it must turn over the taxpayer's money. The depositor(s) can waive this waiting period. The bank will not send money that is subject to attachment or execution under judicial process. "Bank" includes credit unions, savings and loan associations, trust companies, and others described in IRC 408(n) and Treas. Reg. §301.6332–3(b).

2.During the holding period, a levy might be released, or the amount owed could decrease.
If the bank receives no release, it must send the payment after the holding period. No additional notice is required

How do you get a bank levy released?

First, it is very difficult to get a bank levy released. Once the IRS has it's claws on guaranteed revenue they are very reluctant to release those funds. However, they will release a levy under the following conditions and a release of levy notice (form 668–D, Release of Levy/Release of Property from Levy) must be issued to the Bank.

1. The liability is satisfied by full payment, i.e., is no longer owed.
2. The statutory collection period has run out
3. The release will facilitate collection of the amount that is owed.
4. The levy is creating an economic hardship, i.e., the levy will cause the individual to be unable to pay their necessary living expenses
5. The taxpayer makes an installment agreement, unless the agreement allows for the levy

In essence, there must be a resolution made with the IRS in order to have the levy released. The IRS may also require that all outstanding returns be filed prior to releasing a levy too.

So what should you do if your bank account has been levied or you have an outstanding tax liability?

Contact a Tax Professional who can help you!


Feb 1, 2009

Will Bankruptcy Solve My Tax Debt?

Unless you have been stranded on a deserted island, you probably are aware of the worsening state of the U.S. and world economies. In times of economic hardship, bankruptcy is one option many consider in an attempt to get a "fresh start" or relief from debtors. In fact, there are increasing numbers of bankruptcy filings in the United States in 2008- 1,086,130 in fact.

Many individuals

of bankruptcy- means testing- Chap 7-11-13 - when bankruptcy will solve tax debt- and when it will not - recent historical bankruptcy filings

Bankruptcy statistics

Alternatives to bankruptcy

US Bankruptcy COurts

Eligibilty for Chapter 7

means test in Chapter 7

Means test calculator


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