What is an IRS Bank Account Levy/IRS Bank Account Garnishment?
What is an IRS Bank Account Levy
An IRS bank levy is the legal garnishment of funds in your IRS bank account done by the IRS to pay for unpaid IRS taxes plus additional interested and penalties. The IRS will initially have your account frozen and then they will enforce IRS levy on bank account to seize the amount to satisfy what you owe or everything in the account if the entire amount doesn't cover the entire tax amount owed. The IRS can seize from just about any kind of account (e.g. checking, savings, etc), while most IRS bank account seizures do not happen to only US accounts the IRS has been known for seizing foreign accounts of US taxpayers as well.
The IRS can seize all the funds in a bank account in order to satisfy taxes owed. If the seized amount does not cover the entire amount the IRS can continue to issue wage levies in order to satisfy the entire amount of tax owed, plus interest. Each time an IRS levy on bank account is issued it will go through the same process. The IRS will continue this IRS bank account levy or wage levies, until taxes have been paid in full, another settlement has been made, taxpayer has been put under hardship, or the statute of limitations has expired on the tax debt owed.
An IRS bank account levy is the IRS's last resort for collecting unpaid taxes. They will issue the levy if notices of taxes due are ignored or the taxpayer has defaulted on payment plans and is being uncooperative about resolving their tax debt. The IRS offers many alternatives and options for taxpayers that owe taxes and cannot pay, if the taxpayer fails to use one of these alternatives the IRS will be forced to levy assets.
When the IRS Uses an IRS Bank Account Levy
If you receive a "Final Notice of Intent to Levy and Notice of Your Right to a Hearing" and do not take action within 30 days the IRS will begin the IRS bank account levy process. If the IRS receives no word from you or you have not resolved or paid your taxes they will begin to analyze your work and financial situation to determine what form of levy will be most appropriate to collect taxes from you. You will not know what form of levy the IRS will use until they actually begin to take action. The most common form of levies are bank account levies and wage levies. The IRS prefers to use bank levies because they can collect owed monies much faster than through a wage levy.
Before the IRS decides what form of levy to use they will contact your bank and find out how much money is in your accounts. If the IRS determines there is enough money in there to levy they will immediately require the bank to freeze your account. Once your account is frozen the IRS will not notify you and your bank most likely won't either. The bank is required to hold the funds for 21 days before sending to the IRS. This holding period allows time to resolve any questions about account ownership. After the 21 days the bank is required to send the funds, plus interest, to the IRS.