Thursday, July 10, 2008

IRS Cash Withdrawl

Just an ordinary trip to the bank turns into an alarming realization. The IRS has helped themselves to your entire account balance through what is known as a Bank Levy. Your bank has informed you that the IRS has requested the current balance in your account to be sent to them as a payment on your past due tax debt. This, unfortunately, is money you will not get back but here are a few things you should know if this happens to you.

First of all, the IRS levy will remove all the money in your account up to the balance of your tax debt. If you have more money in your account than you owe in taxes they will only remove the amount of your tax debt. If you owe more than what is in your account the bank will remove it all and send it to the IRS. The levy is only set to remove what is in your account on the 1st day the account is levied. The amount in your account will be frozen for 21 days. On the 21st day only the amount that was in your account on day one will be sent to the IRS. After the 1st day any subsequent deposits should be available to you in your account for normal banking activity. Some smaller banks who may not understand the policy of an IRS Bank Levy routinely freeze the account for the required 21 days including all subsequent deposits and send the entire balance to the IRS on the 21st day not providing you access to normal bank activity during the 21 day process. The initial balance will be removed but the subsequent deposits can be restored if action is taken quickly with a professional tax resolution company.

The levy process can also cause a number of bounced checks which can add up plenty of penalties for each check depending on the banking policies of the financial institution you are working with. However, there are warning signs that this action is being considered by the IRS. Within the due process that the IRS must follow you will receive several letters regarding payments on your tax liability. The final notices are sent via certified mail stating the IRS intends to levy you. This can be a bank levy, a wage levy or both. Check back next week and we will discuss the details of a wage levy.

The moral of this story...keep your tax returns filed and up to date and pay your taxes! If you cannot pay the tax amounts owed on your returns, please call a professional tax consultant.

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