What Is a Bank Levy?
An IRS bank levy is a legal process of seizing an individual’s money (in a bank account) to recover the person’s tax liabilities (tax, interest and penalties). The bank must comply with the IRS and will often freeze your account until you have sorted out the liability with the IRS. The IRS can freeze and enforce a levy on any type of bank account, including overseas bank accounts. Bank levies are usually a last resort for delinquent tax evaders, and they tend to occur as a one-time event. The IRS will seize the amount that satisfies your tax liability, and they can seize all the funds in your account. If the funds in the account are insufficient, the IRS can move to recover other assets, including homes, vehicles, and other personal property. Before enforcing a bank levy, the IRS issues a levy notice to the taxpayer, stating that they have ignored or defaulted on their tax repayment plan. The bank levy may persist to all monies coming into the bank account until you repay your tax liability in full, or the statute of limitations on the debt expires.What Is A Wage Garnishment?
Conversely, wage garnishment does not happen as a one-time event, although it is also enforced to repay tax liabilities. With this method of tax recovery, the IRS approaches your employer to deduct a portion of your earnings before they even reach your bank account. This recovery continues until your debt is paid in full, or you take steps to prevent the garnishment order/settle the debt. Unlike bank levies, you can contest a wage garnishment order. If you find yourself facing wage garnishment, it is best to hire a tax debt relief professional, as they can help you negotiate with the IRS to prevent extreme action. For example, when negotiating an Offer in Compromise (OIC), the IRS must cease collection efforts until the process is complete – whether or not the taxpayer succeeds.What to Do About Bank Levies and Wage Garnishment
Once you receive a notice from the IRS stating their intention to enforce a bank levy, it is best to contact a tax relief professional and find out your options. Such options include pursuing tax relief programs such as:- Tax installment agreement – pay in manageable installments
- Offer in compromise – pay a fraction of what you owe to clear the debt
- Currently Not Collectible status – put temporary reprieve until you are in a better financial position
- Penalty abatement – remove the penalties for nonpayment with valid reasons
