Tax Compliance Levy – Bank, Wage Levy Garnishments Relief

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If a taxpayer does not comply with the IRS requirements and adherence of the IRS notices and bills it sends as a result of monies owed for back taxes, IRS will fully engaged there tax compliance through collection enforcement with the issuance of a bank levy or a wage garnishment levy.

IRS can only usually levy or garnish  after these  (3) three requirements are met:

1. The Internal Revenue Service assessed the tax and sent you a Notice and Demand for Payment,
2. You the taxpayer neglected or refused to pay the tax and you let IRS know by voice or mail,
3. IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing Levy notice at least 30 days before the levy.

Method of Delivery of a Tax Levy or Wage Garnishment.

IRS may give you this notice:

1. in person,

2. leave it at your home or,

3. your usual place of business,

4. or send it to your last known address by certified or registered mail.

Bank Levies  Holding Period

A bank must wait 21 calendar days after a levy is served before sending payment.

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 all credit unions, savings and loan associations, trust companies.

During the holding period, a bank tax 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.

Absolutely no additional  tax notice is required.

Consider the holding period when deciding how long to project the accruals on a bank levy.

 
Duties of the Bank Liaison

The holding period was created to settle disputes about ownership of bank accounts before money is sent.

Sometimes ownership is not settled before the holding period ends.

If this happens, ask the bank for more time.

Issues that may arise.

Multiple Signature Authority for a Bank Account

A bank  levy served to a bank attaches to funds in a bank account for which the taxpayer has an unrestricted right to withdraw funds (signature authority)  even if multiple persons have signature authority for that bank account.

A non-liable third party may claim ownership of funds in a bank account when multiple people hold signature authority for that bank account. Treat this dispute as a potential wrongful levy.

A wrongful levy is a levy that improperly attaches property belonging to a third party in which the taxpayer has no rights.

Reminder:

For bank levies if additional time is needed beyond the 21 day hold period to determine ownership, request the bank hold the funds. Provide the potentially wrongfully levied party a deadline date for providing substantiation and provide the bank with a specific extension date to forward the funds.

Amount that must be surrendered as a result of the Tax Levy

The bank must send the amount in the taxpayer’s accounts.

A bank levy attaches to any property or rights to property that belong to the taxpayer or on which there is a Federal tax lien, unless it is exempt.

Legal authority to Levy

See IRC 6331, Levy and Distrait , for legal authority to levy.

However, it must send no more than the amount shown on the notice of levy.

By law, banks cannot immediately honor the IRS tax  levy.

Very Important Note:

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.

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

Tax Compliance Levy – Bank, Wage Levy Garnishments Tax Relief