HOW A BANK LEVY CAN RUIN YOUR DAY

An IRS levy is an enforcement tool that takes your money or property. There a two basic types of levies that the IRS uses; One is a continuous levy and does not stop taking your money until it is released by the IRS. The other is a one-time levy that takes your money once and is over. (A lien is very different in that it is not a taking of money. A lien is filed with the County Recorder and attaches to your property like a judgement.) The IRS can levy your bank account, wages or Accounts Receivable. A bank levy is a single enforcement action that attaches only to funds currently in the account, NOT future deposits. You can literally make a deposit any time after the levy is executed to cover outstanding checks and continue to use the account. The banker holds the funds for 21 days before sending it to the IRS. DM&A may be able to get a bank levy released, depending on the circumstances.

A wage levy is continuous and attaches a portion of each subsequent paycheck. An IRS wage levy will take about 80% of your take-home pay. (The State of California wage levy only takes 25%.) DM&A can get a wage levy released or reduced and negotiate a resolution to your unpaid tax liability that you can live with and afford.

Levies on Accounts Receivable are usually single enforcement actions that attach to current receivables, not future receivables, but under some circumstances can be continuous.

Here is how a bank levy can ruin your day.

You go to the ATM or you try to buy something at a store and your debit card is turned down. You get a phone call from the electric company or your landlord saying that your check was refused. Now you have fees for overdraft, a possible late fee and bad check fee.

The IRS levy will only take the amount that is in the account when the levy hits the bank up to the amount owed. If you add more funds later in the day or in following days the levy does not attach those funds. However, the IRS will send out another levy in a few weeks if someone does not contact the IRS and propose a resolution to your unpaid taxes.

The IRS can also levy accounts that are associated with your Social Security Number. Therefore, if your social security number is associated with your spouse's or one of your children's accounts the levy can attach to those funds also.

While it is possible under very limited circumstances to have a levy reversed, the most critical step you can take after you received a notice of levy is to call the number on the IRS notice or call a tax professional like Demetriou, Montano, & Associates. We can help to immediately stop the execution of any new levies and may be able to reverse a levy that has already taken funds from your account.