No, the Internal Revenue Service (IRS) cannot take money directly from your bank account without providing you with advance notice. The IRS must follow a specific legal process involving multiple communications before it can levy your bank account to collect unpaid taxes.
Understanding the IRS Levy Process
An IRS bank levy is a legal seizure of your property to satisfy a tax debt. While the IRS has significant power to collect unpaid taxes, this power is subject to strict rules and due process protections for taxpayers. This means they cannot simply empty your bank account without warning.
The process is designed to give taxpayers ample opportunity to resolve their tax issues, understand their rights, and avoid a levy. A crucial step in this process is the issuance of a Notice of Intent to Levy.
Key Steps Before a Bank Levy
Before the IRS can take money from your bank account, a series of notices and demands typically precede the action. Understanding these steps is vital for any taxpayer facing potential collection actions:
- Tax Assessment and Demand for Payment: This is the initial bill or notice you receive informing you of a tax liability. This notice demands payment.
- Notice of Federal Tax Lien: If you don't pay after the initial demands, the IRS may file a Notice of Federal Tax Lien, which publicly announces your tax debt and establishes the IRS's priority claim to your property. While not a levy itself, it often precedes collection actions.
- Final Notice of Intent to Levy (and Your Right to a Collection Due Process Hearing): This is the most critical notice before a bank levy. It informs you of the IRS's intention to levy your property and, importantly, informs you of your right to a Collection Due Process (CDP) hearing. This hearing is an opportunity to discuss your tax debt, explore collection alternatives (like an installment agreement or an Offer in Compromise), or challenge the levy itself.
- Waiting Period: After issuing the Final Notice of Intent to Levy, the IRS generally must wait at least 30 days before taking any levy action. This period allows you time to respond, request a CDP hearing, or make arrangements for payment.
The following table summarizes the typical sequence of notices:
| Stage | Type of Notice | Purpose |
|---|---|---|
| Initial Assessment | Notice of Tax Due/Balance Due | Informs taxpayer of outstanding debt and demands payment. |
| Lien Filing | Notice of Federal Tax Lien | Publicly establishes the IRS's claim to your assets (not a levy). |
| Pre-Levy | Final Notice of Intent to Levy | Informs of impending levy and taxpayer's right to a Collection Due Process (CDP) hearing. |
| Action | Bank Levy/Wage Garnishment | Seizure of assets or wages after due process. |
What to Do If You Receive an IRS Notice
Receiving a notice from the IRS, especially one indicating an intent to levy, can be alarming, but it's crucial not to ignore it. These notices are your opportunity to address the situation before more drastic collection actions are taken.
Here are practical steps to consider if you receive an IRS notice:
- Do Not Ignore It: The worst thing you can do is disregard the notice. Ignoring it will only lead to further enforcement actions, including potential levies.
- Understand the Notice: Read the notice carefully to understand why it was sent, the amount owed, and the specific actions the IRS intends to take. Pay close attention to deadlines for responding or requesting a hearing.
- Contact the IRS: If you have questions or believe there's an error, contact the IRS using the number provided on the notice. Be prepared with your taxpayer identification number and a copy of the notice.
- Explore Payment Options: The IRS offers various options for taxpayers who cannot pay their tax debt in full immediately. These include:
- Installment Agreement: Allows you to make monthly payments for up to 72 months.
- Offer in Compromise (OIC): Allows certain taxpayers to resolve their tax liability with the IRS for a lower amount than what they originally owe.
- Currently Not Collectible (CNC) Status: If you demonstrate that you cannot pay your tax liabilities and meet certain income and asset criteria, the IRS may temporarily delay collection until your financial condition improves.
- Seek Professional Help: For complex tax issues, or if you feel overwhelmed, consider consulting with a qualified tax professional, such as a Certified Public Accountant (CPA), an Enrolled Agent (EA), or a tax attorney. They can help you understand your rights, negotiate with the IRS, and explore the best resolution strategies.
Remember, the IRS's primary goal is to collect the taxes owed. By engaging with them and proactively seeking a resolution, you can often prevent a bank levy and find an agreeable path forward.
