The IRS has the authority to take money directly from a taxpayer’s bank account in certain situations, even without providing advance notice. This controversial practice is known as a “silent levy” or “non-judicial levy.” Understanding when and how the IRS can levy bank accounts can help taxpayers avoid unpleasant surprises.
What is an IRS bank levy?
An IRS levy allows the agency to seize assets to pay off overdue tax debts. Levies are different than tax liens. With a lien, the IRS places a legal claim on property as security or collateral for taxes owed. A levy actually takes the property to satisfy the tax debt.
Bank levies allow the IRS to seize money directly from bank accounts. The bank is required to turn over the funds from a taxpayer’s account to the IRS to pay the tax debt. This can happen electronically if the IRS has access to account details.
When can the IRS levy a bank account?
The IRS is authorized to levy and seize assets in the following situations:
- If a taxpayer owes back taxes, penalties, or interest.
- If a taxpayer has an outstanding tax lien and they default on paying it back.
- If the IRS sent a final notice of intent to levy and the taxpayer did not respond.
In general, the IRS is required to provide written notice to a taxpayer before imposing a levy on property. This pre-levy notice gives the taxpayer an opportunity to pay the tax debt or set up an IRS repayment plan before assets are seized.
Silent bank levy without notice
However, there are exceptions where the IRS can levy a bank account without sending advance notice:
- If the IRS believes providing notice would jeopardize tax collection (for example, if assets are being removed or hidden).
- If the IRS determines the collection is “in jeopardy” and sending notice could hinder collecting the tax.
- If the IRS discovers a state tax refund is about to be paid to a taxpayer who owes past-due federal taxes.
These “jeopardy” and “state refund” levies allow the IRS to take the funds without the standard 30-day notice period.
How does the IRS levy a bank account?
To levy a bank account, the IRS serves a notice or electronic order on the bank holding the taxpayer’s assets. This requires the bank to immediately freeze the account and send the money to the IRS to pay off the tax debt.
The bank must comply and cannot notify the account holder in advance. The taxpayer’s first notice is often when the money is already gone from their account.
Do banks notify account holders of IRS levies?
If the levy has the standard 30-day notice period, the bank is required to promptly notify the account holder.
However, for silent levies without notice, the bank cannot inform the taxpayer until after the funds are surrendered to the IRS. At that point, the bank must send a written notice that the account was levied.
How much money can the IRS take?
The IRS can seize any or all money in an account to satisfy a tax debt. There is no limit to the amount the IRS can take through a bank levy.
The IRS will generally take enough to pay the entire amount due, including penalties and interest. Any remaining money left in the account is released back to the taxpayer.
Joint bank account levies
If a jointly held bank account receives an IRS levy against only one account holder, the bank may have to surrender the entire account balance. However, the non-liable account holder can file for a refund of their share of the seized money.
To get the refund, the innocent spouse or account holder must file IRS Form 843 and prove their portion of ownership in the joint account funds.
Returning levied funds
When the IRS seizes money without proper notice, affected taxpayers can request to have their levied funds returned. To do so, you must act quickly and take the following steps:
- Submit an IRS Request for Return of Wrongfully Levied Property (Form 12959)
- File an Application for Taxpayer Assistance Order with the Taxpayer Advocate Service and request their help returning the levied assets.
- Follow up regularly on the status of your refund and be persistent
The IRS may return funds that were wrongfully levied, but the process can be lengthy. Having complete records and good documentation about the improper levy will help support your case.
Avoiding silent bank levies
While unpleasant, silent bank levies allow the IRS to collect back taxes from evasive account holders who dodge requests to pay. Avoid encountering a surprise IRS levy by:
- Paying all tax bills in full and on time.
- Responding promptly to any IRS notices.
- Entering an installment agreement if you cannot pay in full.
- Keeping accurate tax records that support your information returns and filings.
If you receive a Final Notice of Intent to Levy, act right away to resolve your tax debt. If you already had funds seized, act quickly and persistently to get back any money that was wrongfully taken.
The Takeaway
The IRS can levy bank accounts to seize money and pay off overdue taxes. Silent levies without notice are allowed if the IRS believes giving notice would hinder tax collection. Taxpayers can request the return of wrongfully levied money but must act promptly. Avoiding tax arrears and responding to IRS notices can help taxpayers steer clear of levy trouble.
| Levy Type | Notice Required? | Notice Recipient |
|---|---|---|
| Regular Levy | Yes | Taxpayer |
| Jeopardy Levy | No | None |
| State Tax Refund Levy | No | None |
Conclusion
The IRS has broad powers to levy taxpayer assets, including taking money directly from bank accounts. While designed to help the IRS collect on seriously delinquent accounts, silent levies without notice can catch taxpayers by surprise and create real financial hardship. Understanding the rules, responding promptly to IRS letters, and staying current on taxes are the best ways to avoid getting levied.