Best Way to Resolve IRS Bank Levies in Los Angeles

Best Way to Resolve IRS Bank Levies in Los Angeles

An IRS bank levy is a legal mechanism that allows the Internal Revenue Service to seize funds directly from a taxpayer’s bank account to satisfy unpaid tax debts. The IRS has the authority to impose a levy under the Internal Revenue Code (IRC). The process typically begins with the IRS sending a series of notices and demands for payment to the taxpayer. If these notices are ignored, the IRS will issue a final notice of intent to levy and a notice of your right to a hearing at least 30 days before the levy. This gives the taxpayer a final opportunity to resolve the issue before the IRS takes action to seize the funds.

Differences Between Levies and Liens

It is important to distinguish between an IRS levy and an IRS lien. An IRS lien is a legal claim against a taxpayer’s property, including real estate, vehicles, and financial assets, as security for unpaid tax debt. It does not involve the immediate seizure of property but rather places a claim on the taxpayer’s assets, which can affect their credit rating and ability to sell the assets. In contrast, an IRS levy involves the actual seizure of property or funds. While a lien secures the government’s interest in the taxpayer’s property, a levy allows the IRS to take the property to satisfy the debt.

Common Reasons for Receiving a Bank Levy

Unpaid Taxes

The most straightforward reason for an IRS bank levy is unpaid taxes. When a taxpayer fails to pay their tax debt, the IRS will take steps to collect the amount owed. This can involve garnishing wages, seizing property, or levying bank accounts. Unpaid taxes can accumulate from various sources, including income tax, payroll tax, and other federal taxes.

Ignored IRS Notices and Deadlines

Before resorting to a bank levy, the IRS sends multiple notices to the taxpayer, demanding payment and outlining the consequences of non-compliance. Ignoring these notices and failing to meet the deadlines set by the IRS can lead to the imposition of a bank levy. It is crucial to respond promptly to any communication from the IRS to avoid escalating the situation to the point of a levy.

How Bank Levies Affect Your Accounts

Freezing of Funds

When the IRS issues a bank levy, it effectively freezes the taxpayer’s bank account. This means that the funds in the account are held and cannot be accessed by the account holder. The bank is required to hold the levied funds for 21 days before transferring them to the IRS. This period is intended to give the taxpayer an opportunity to resolve the issue with the IRS and potentially get the levy released.

Possible Seizure of Assets

In addition to freezing the funds, the IRS can seize the money in the account up to the amount of the tax debt. If the balance in the account is less than the amount owed, the IRS can continue to levy the account until the debt is satisfied. This can result in significant financial hardship, especially if the seized funds were intended for essential expenses such as rent, utilities, or payroll.

Steps to Take When You Receive a Bank Levy Notice

Immediate Actions

Reviewing the Levy Notice Thoroughly

The first step upon receiving a bank levy notice is to review it carefully. The notice will contain crucial information such as the amount owed, the reason for the levy, and the deadline for taking action. Understanding these details is essential for addressing the issue appropriately. Make sure to note the specific tax periods and amounts mentioned, as well as any instructions for responding to the notice.

Confirming the Legitimacy of the Levy

Before proceeding, confirm the legitimacy of the levy notice. Scams involving fake IRS notices are not uncommon. Verify that the notice is indeed from the IRS by checking for official IRS letterhead and contact information. You can also contact the IRS directly to confirm the authenticity of the notice. Be wary of any suspicious details or requests for personal information that seem unusual.

Contacting the IRS

Methods of Communication

Once you’ve confirmed the levy’s legitimacy, it’s crucial to contact the IRS promptly. There are several ways to communicate with the IRS:

1. Phone: Call the number provided on the levy notice. Be prepared for potentially long wait times, but this method allows for immediate communication with an IRS representative.
2. In-Person Visits: You can visit a local IRS office to discuss your situation in person. This can be helpful for more complex issues that require detailed explanations.
3. Mail: While slower, sending a written response to the IRS can be useful for documenting your efforts to resolve the issue.

Key Information to Have Ready

When contacting the IRS, be prepared with the following information:

• Tax Identification Number (TIN): Your Social Security Number (SSN) or Employer Identification Number (EIN).
• Bank Account Details: Information about the affected bank account, including the account number and the name of the bank.
• Copy of the Levy Notice: Having the notice on hand will help you provide accurate information and reference specific details during your conversation.

Strategies for Resolving IRS Bank Levies

Negotiating with the IRS

Requesting a Levy Release

One of the first steps you can take is to request a levy release. This involves contacting the IRS and explaining why the levy is causing undue hardship. If you can demonstrate that the levy is preventing you from meeting necessary living expenses or operating your business, the IRS may agree to release the levy. Supporting documentation, such as financial statements and expense records, can strengthen your case.

Setting Up a Payment Plan

If you cannot pay your tax debt in full, setting up a payment plan with the IRS can be a viable solution. An installment agreement allows you to pay your debt over time in manageable monthly payments. By entering into a payment plan, the IRS may agree to release the levy, allowing you to regain access to your bank accounts. To set up a payment plan, contact the IRS and provide details about your financial situation and proposed payment terms.

Submitting a Collection Due Process (CDP) Appeal

What a CDP Appeal Involves

A Collection Due Process (CDP) appeal is a legal right that allows taxpayers to challenge a levy or lien before it is enforced. By filing a CDP appeal, you can request a hearing with an independent Office of Appeals to discuss your case and explore alternative solutions. The CDP appeal provides an opportunity to resolve the levy without immediate seizure of your assets.

How to File and the Timeline

To file a CDP appeal, you must submit Form 12153, Request for a Collection Due Process or Equivalent Hearing, within 30 days of receiving the final notice of intent to levy. The form requires you to provide reasons for your appeal and propose alternative resolutions, such as an installment agreement or Offer in Compromise. The IRS will schedule a hearing to review your case and make a determination.

Proposing an Offer in Compromise (OIC)

Eligibility Criteria

An Offer in Compromise (OIC) is a program that allows taxpayers to settle their tax debt for less than the full amount owed. To be eligible, you must demonstrate that paying the full debt would cause financial hardship or that there is doubt as to the collectibility of the debt. The IRS considers factors such as income, expenses, asset equity, and overall ability to pay.

Application Process and Documentation

To apply for an OIC, submit Form 656, Offer in Compromise, along with Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses, which detail your financial information. You must also include an initial payment and an application fee. The IRS will review your offer and may negotiate terms before accepting or rejecting it. Providing accurate and thorough documentation is crucial to the success of your application.

Applying for Currently Not Collectible (CNC) Status

Definition and Benefits

Currently Not Collectible (CNC) status is a temporary relief option for taxpayers who cannot pay their tax debt due to financial hardship. When the IRS grants CNC status, they suspend collection activities, including levies, until the taxpayer’s financial situation improves. This status provides immediate relief and prevents further financial strain.

How to Apply and Qualify

To apply for CNC status, contact the IRS and provide detailed financial information, including income, expenses, and asset values. You may need to submit Form 433-F, Collection Information Statement, to demonstrate your inability to pay. The IRS will review your financial situation and determine if you qualify for CNC status.

Seeking Penalty Abatement

Grounds for Penalty Abatement

Penalty abatement is the reduction or removal of penalties assessed on your tax debt. The IRS may grant penalty abatement if you can show reasonable cause for failing to meet your tax obligations, such as a serious illness, natural disaster, or other significant hardship. First-time penalty abatement is also available for taxpayers with a clean compliance history.

Application Procedures and Required Evidence

To request penalty abatement, submit a written request to the IRS explaining the circumstances that led to the penalties. Include supporting documentation, such as medical records, insurance claims, or other evidence of hardship. You can also use Form 843, Claim for Refund and Request for Abatement, to apply for penalty abatement. Providing comprehensive and compelling evidence increases the likelihood of your request being approved.

Resolve Bank Levies with Tax Alliance in Los Angeles

Empower yourself by taking proactive steps to address your tax issues. Ignoring a bank levy will only exacerbate the situation, leading to further financial hardship and complications. By understanding the options available and seeking expert advice, you can take control of your financial future and work towards a resolution. Remember, the sooner you act, the better your chances of mitigating the impact of the levy and finding a sustainable solution.

For those facing the challenges of an IRS bank levy, Tax Alliance is here to help. Our experienced team of tax professionals is dedicated to providing comprehensive support and expert guidance tailored to your unique situation. Contact Tax Alliance today for a free, no-obligation consultation. Let us assist you in navigating the complexities of IRS bank levies and achieving a successful resolution. With our support, you can regain financial stability and peace of mind. Reach out to us at 1-800-987-3051 or visit our website at https://www.taxalliance.com/ to learn more about our services and how we can help you resolve your tax issues.