This is the fourth post in a five part series on IRS levies. This post will cover IRS business bank account levies; in the previous posts we discussed personal bank account levies, wage levies, and personal asset seizures and in the following week we will discuss business asset seizures.
If you are a small business owner, you know that any hiccup in your cash flow can cause serious problems. Money that is in your business bank account is often already reserved for a future business expenses that must be paid in short order. If the money in that bank account is suddenly levied by the IRS, it could cause you to fall short on essential obligations such as wages, rent, or vendor bills. Therefore, an IRS business bank account levy is something that must be addressed as quickly as possible.
What happens when the IRS issues a bank levy?
When the IRS issues a bank levy, they send a Notice of Levy to any financial institution at which they think your business may have an account. The Notice of Levy states your business’s employer identification number (EIN) and the amount of tax your business owes. If the financial institution finds an account linked to your business’s EIN, they are required to place a freeze on all current funds up to the amount of the tax owed. Only funds that are present in the account on the date the financial institution processes the levy can be frozen. If you deposit a check the day after the levy is processed, the financial institution cannot freeze those funds to satisfy the levy.
The freeze remains in place for 21 days; during this time the money remains in your account, but you do not have access to it. If at the end of the 21 days you have not successfully secured a release of levy from the IRS, the bank will turn the funds over to the IRS. Therefore, it is important to attempt to secure a levy release within this 21 day period.
Arguing that the Levy Would Create a Hardship
If you wish to be successful in this argument, you cannot argue that the levy would create a hardship on your business. Instead, you must argue that the levy would create a hardship on your business’s employees. The IRS has fluctuated its policy with regards to granting levy releases on this basis, but in some cases this argument can help you secure a levy release. To make the best argument for release, you must prove that all or a portion of the funds in the account are needed to pay your employee wages and withholding for the next payroll. The IRS may then issue a partial levy release for the amount needed to satisfy this obligation.
If you have attempted to negotiate with the IRS agent or IRS division assigned to your case and they refuse to grant you a levy release, there are several options to appeal that decision.
- The Collection Appeals Process can be used for a quick review of a levy. This review is typically limited to whether the levy followed all technical guidelines when it was issued.
- A Collection Due Process Equivalency Hearing can be requested if you received a Final Notice of Intent to Levy within the last year. It can take a long time for this type of appeal to be considered. However, at the collection due process hearing, the appeals officer can consider all collection alternatives to the levy including installment agreements and currently not collectible status.
- You can request the assistance of the Taxpayer Advocacy Service if an IRS levy is creating hardship on your employees. If you prove to them that the bank levy will create a financial hardship, they can help you secure the release of the levy and, in extreme cases, they will issue a taxpayer assistance order telling the IRS to release the levy.
If your business bank account has been levied by the IRS, quick and efficient action is a necessity to increase your chances of securing a release of levy from the IRS. Contacting an experienced tax attorney to advocate for you in this process can ensure that you have done all you can to present the strongest case for levy release.