What Do I Do if the IRS Freezes my Bank Account?

If you have received notice that the IRS has frozen your bank account, the experienced attorneys at Wiggam Law can help with options for freeing your funds such as setting up an installment plan, entering an offer in compromise, or pleading hardship.

Have you been ignoring notices from the IRS? If you owe the agency money and have not responded, it could move to place a levy on your bank account and freeze your funds up to the amount of your tax liability including penalties and interest.

Freezing your bank account is not the first action the IRS will take when you owe back taxes. The agency will first send you notices and demands for payment. When those go unanswered, it will send you a Notice of Intent to Levy and Notice of Your Right to a Hearing. You generally have 30 days to respond to these notices. The agency may also send you a Third Party Contact notice, alerting you that it is going to contact your bank.

What Is a Levy on a Bank Account?

If you do not respond to the Intent to Levy, the IRS will move forward and place a levy on your bank. A levy is a legal seizure of your assets, in this case the money in your bank account, to satisfy your tax debt. The levy is sent by mail and is effective as of the date and time received, not the date of the letter.

What Is the 21-Day Waiting Period?

The IRS does not immediately remove your funds, but instead places a 21-day freeze on the money in your account up to the amount of taxes you owe. The 21-day freeze or waiting period is intended to give you time to make payment arrangements or dispute the levy.

If you have not paid your taxes or reached another agreement with the IRS at the end of the 21-day period, the agency can seize the funds in your account. This means the bank must turn over your money to the IRS. Even after the funds are gone, you can still file a claim with the IRS to have the money returned to you.

What About Future Deposits to my Account?

Note, when the IRS places a freeze on your bank account, the freeze applies to the specific amount noted in the levy on the day and time it is received by the bank. If you deposit money into your account after the IRS has placed the levy, the freeze generally does not apply to these additional funds. If the freeze expires and the IRS seizes funds, it only takes the amount specified in the levy.

How Can You Stop or Release an IRS Bank Account Levy?

To unfreeze your bank account funds and have the levy released, you can:

  • Pay your taxes in full, including interest and penalties
  • Enter into an installment agreement to pay your tax liability over a period of time
  • File for an Offer in Compromise to reduce your overall liability and pay the lower amount over time
  • Plead economic hardship to the IRS, meaning you cannot meet basic needs or pay reasonable living expenses without the frozen funds
  • Prove the IRS made an error, such as freezing your account when you have no tax liability and the taxpayer with unpaid debt is only a signatory on your account
  • Demonstrate the funds are not yours, for example if the account is in your name but the funds really belong to your elderly mother who has you pay her monthly bills with the money

If the IRS has placed a levy on your bank account and your money is frozen, it’s best to act quickly and hire an experienced tax attorney as soon as possible to help you find a solution. At Wiggam Law, our team of experienced tax lawyers can help you evaluate all your options and represent you. Give us a call today at (404) 233-9800 to get started.