I received a call from a taxpayer that his bank account had been drained and his rent check had bounced. He was surprised as he had just been paid and there should have been plenty of money to cover all of his bills. He was sure the bank had made a mistake. When he contacted the bank, they informed him the Internal Revenue Service had issued a levy and the bank would be sending his money to the Internal Revenue Service. He was in a panic when he called our office. He had just been paid and without those funds, he did not know how he would be able to get to work, feed himself or his family or pay any of the monthly expenses. Like many taxpayers, he was living paycheck to paycheck and did not have any savings. The levy issued to the taxpayer wiped out and left him destitute. A bank levy is financially devastating and immediate action is required.
When a taxpayer is aware of the levy, it is important to obtain a copy of the levy from the financial institution and confirm the date they received the levy. Under Internal Revenue Code Section 6332(c), a bank must wait 21 days to transmit the fund to the Internal Revenue Service. During the 21 days, the financial institution must hold the funds. The day after the 21 day hold expires, the funds up to the amount of the levy are transmitted to the Internal Revenue Service.
The taxpayer contacted our office because he did not know what to do. He was able to obtain a copy of the levy and confirm the date the funds would be released to the Internal Revenue Service. Prior to the 21 day hold expired, the release of the levy needs to be negotiated. Contemporaneous with the negotiating the release of the levy, the outstanding tax liability needs to be resolved. In this case, we were able to negotiate small monthly payments until the liability is paid.
It is important when a levy is issued, immediate and swift action is taken. It is important to negotiate the release of the bank levy contemporaneously with the resolution of the unpaid tax liability. By negotiating both the release of of the levy and resolution of the unpaid tax liability, it protects the taxpayer from any further levies being issued. The resolution of the unpaid tax liability can include an Offer in Compromise, partial payment installment agreement, installment payment agreement or currently noncollectible. The resolution of your unpaid tax liability is personalized based upon your facts and circumstances. There are no “one size fits all” solutions as everyone’s financial situation is unique and your solution needs to be personalized to your situation.
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