Can The IRS Levy A Joint Bank Account?
27th February 2012 by Tax Man No CommentsShort Answer: Yes
But first lets learn a bit more about the IRS levy: An IRS levy is a legal seizure of property to satisfy a tax debt.
When will the IRS issue a levy?: The IRS will usually levy after these three requirements are met:
1. The IRS assessed a tax balance and sent a “Notice and Demand for Payment”
2. The taxpayer neglected or refused to pay the balance due.
3. Lastly, at least 30 days before issuing a levy, the IRS sends a Final Notice of Intent to Levy.
The IRS sends notices to your last known address on file.
Types Of IRS Levies?: There are 4 common forms of levy sources for the IRS.
1. Bank: When the IRS withdraws funds from your bank account. Typically you wont know it until it has been issued. On the day the levy comes the bank is required to freeze the funds up to the amount owed. If the levy is not released within 21 days, the bank is required to send the funds to the IRS.
As long as the responsible taxpayer’s social security number is on a joint or other third party account, the IRS is allowed to levy it. Regardless of whose funds were deposited into the account, this remains true.
Bank levies are usually difficult to have released. The IRS basically takes the position that if you have money sitting in the bank, you do not need it for necessary living expenses or you would have already spent it. The other is “undue hardship”. You will have to usually provide utility shut off notices or an eviction notice.
2. Wage Levy: This levy is sent to your employer and requires that the employer withhold a certain portion of your pay check. The IRS can levy up to 85% of your pay check. Social Security payments can also be levied by the IRS.
3. Third party accounts: This would include retirement accounts, stock accounts, 1099 sources basically any source of income or assets with a few exemptions.
4. Assets: This is the least common type of levy, because it is typically difficult for the IRS to do. This is any type of asset, such as houses, vehicles, boats, etc.
How To Get An IRS Levy Released?: File your returns, pay the debt in full, or negotiate.
It’s important to note that before an IRS levy can be removed, all unfiled tax returns must be filed. Until all accounts are current, the IRS will not even consider releasing the levy. Next, if you pay the tax liability due the IRS will release the levy. Bankruptcy can also release a levy.
Unable to pay the balance?
Then submit either an Offer In Compromise, Installment Agreement or have the case placed in hardship status. I always err on the side of recommending expert assistance. A professional with experience will know how to work the tax laws to your advantage, what financial disclosures are legal and how to speed up the process.
The IRS levy must always be taken seriously, but with a bit of education, you can work your way through, or around, a most taxing situation.
