In fact, the IRS can freeze your bank account, and this is how it acts as a method to collect unpaid taxes by essentially putting a hold on someone’s funds. The freezing of a bank account puts a restriction on accessing or withdrawing money when all other channels to collect the owed tax have failed.
If you have tax issues and are dealing with a considerable amount owed to the IRS, you may wonder whether they can freeze your bank account. Indeed, just the thought of having your hard-earned money locked away will cause you stress and put you in a tight corner. Here, our skillful tax debt attorneys discuss the ramifications of an IRS bank account freezing and what you can do to protect yourself.
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An IRS bank account freeze is explained.
The IRS utilizes bank account freezing as a legal means to recover unpaid taxes, essentially putting a hold on the funds in an individual’s account. This action restricts access to and withdrawal of money when previous attempts to collect owed taxes have been unsuccessful.
Only after sending a series of warning letters to the taxpayer regarding their unpaid taxes does the IRS freeze bank accounts. These serve as alerts regarding the outstanding debt and its consequences should no action be taken. If these notices remain unaddressed, the IRS will send another notice known as the Notice of Intent to Levy, thereby proclaiming its intent to freeze the taxpayer’s bank account.
At What Point Does the IRS Freeze Your Bank Account?
The IRS has various means of securing compliance in tax collection. A freeze of the bank account is the last of such possible options, a step considered grave and reserved for repeat offenders of tax obligations or cases involving fraudulent activities.
The IRS first makes a concerted effort to reach out and enable the taxpayer to resolve their tax debts before freezing their bank accounts. The process begins with the acceptance of multiple notices sent to the address on file with the IRS. Such notices warn taxpayers that their tax debts are overdue and demand immediate payment to avoid further consequences.
The IRS typically sends an account hold, known as the Notice of Intent to Levy, when it moves to freeze your bank account. This provides a last chance for taxpayers to resolve their tax debt before the freezing of their bank accounts starts. It is paramount that the taxpayer takes the situation seriously and considers other options open to them in resolving their tax issues, including requests for payment plans or tax settlements.
How Long Can the IRS Freeze Your Bank Account?
Once a bank receives a levy notice from the IRS, it’s legally required to freeze the funds in the account for 21 days. During this period, your client cannot access the money, but the IRS doesn’t have it yet either. That 21-day window is critical.
In a Hurry? Dial +18-503-850-342 Now!What reasons would someone have for an IRS bank account freezing?
Several reasons could prompt the IRS to freeze your bank account; these are some of the most common:
Unpaid taxes
The most common reason for the IRS to freeze a bank account is that the taxes are due and unpaid. If any taxpayer has an unresolved tax obligation with an IRS notice, then after repeated notices and warnings, the IRS may freeze their bank accounts.
Noncompliance
The IRS gave considerable time to resolve the debt and issued multiple warnings, including one overwhelming final warning before the Notice of Intent to Levy. Yet, if the situation remained irreconcilable, then the IRS found it reasonable to classify the accounts of these taxpayers as freezeable.
Intensification of Collection Efforts
It literally means that freezing your bank account comes after a rather lengthy process of notices and warnings delivered on behalf of the IRS to let the taxpayer know about their outstanding liabilities.
Intent on Recovering Unpaid Taxes
After exhausting all other avenues for tax collection, the IRS resorts to bank account freezing.
Enforcement of Collections
Considered as one of the enforcement actions, bank account freezing does demonstrate the seriousness with which the IRS treats unresolved debts. Other enforcement actions in special circumstances would include property liens, wage garnishment, seizure of assets, and the like, depending on the applicable jurisdictions and tax liabilities under consideration.
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Preparing for an IRS Bank Account Freeze
Once you get the Notice of Intent to Levy, you must act immediately to prevent the IRS from trying to freeze your bank account. First, you should consult a tax attorney to figure out your options and make a plan to fix the situation. At our firm, we can guide you through negotiations with the IRS and help you explore alternatives to having your bank account frozen.
Second, consider moving your funds from the account subject to IRS freezing to a different account held in another financial institution. This won’t stop the IRS from finding and freezing the new account, but it should give you time to pay the tax debt before the funds are frozen.
How do I have the freezer lifted?
Should an IRS account freeze be in place, there is a chance to negotiate its lifting. One way to resolve the freeze is to work out something with the IRS. There are several options, such as putting together a payment plan, sending an offer in compromise, or requesting a temporary release from the freeze based on financial hardship.
Negotiating with the IRS
In cases of bank account freezing or other tax-related problems, you should handle all disagreements with the IRS tactically. Having a tax attorney by your side greatly increases your chances of securing a better deal in these scenarios. We do have the knowledge and experience necessary to advocate for your rights and negotiate the best possible outcome on your behalf.
Penalties and Consequences
If you fail to resolve a delinquent tax debt and the bank account levy, the penalties and consequences can be severe. In addition to levying amounts on bank accounts, the IRS can garnish income, seize properties, and place liens against properties. Further, the tax payments and their resulting strain on finances can severely impair a person’s credit score and overall financial welfare.
Bottoms Up!
If ever in a jam with the IRS, seeking professional help from a tax attorney will put you a step closer toward financial freedom. Bruner Wright PA has a whole lot of experience in its hands because of decades of servicing clients with complex tax issues, including situations where the IRS may freeze your bank account.
Call Bruner Wright today to schedule an appointment, and let’s help you straighten out the tax situation and protect your financial future.
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