It is virtually impossible to exist nowadays without at least one bank account. Indeed, according to the U.S. Federal Reserve, more than 80% of American adults keep their money in banks. This makes sense, as keeping cash can be quite risky.
If you have a bank account, you expect your money to be available for you to use when you need it. However, having unpaid tax debt can endanger your bank accounts. In fact, the Internal Revenue Service can levy your bank account to pay your tax bill.
What is an IRS levy?
According to the IRS, a levy gives the IRS the legal right to take your property to resolve your tax debt. Just as the IRS may levy your personal property, vehicle and real estate, the agency can go after your bank accounts.
How does a bank account levy work?
If the IRS levies your bank account, your financial institution freezes the assets in it. You then have 21 days to reach out to the IRS to pay your tax debt or dispute the levy. After that time, your bank delivers your money to the IRS to satisfy your tax debt. Your bank also might charge you a service fee for processing the levy.
How can you avoid a bank levy?
The most effective way to prevent a bank levy is to file timely returns and pay your taxes. If you are unable to pay, it may make sense to contact the IRS to discuss your options. Ultimately, though, because of the potentially catastrophic consequences of having the IRS levy your bank accounts, it is advisable to pay close attention to any tax-related correspondence you receive.