The IRS Levied My Bank Accounts!!

IRS and the banks are all in cahoots... they know everything!!!

 

Not sure if the IRS is any different, but in most cases when accounts are levied, you can file for an exemption after the fact. You have to account for all of your money and monthly payments, file it with the garnishing agent (in my case, it was the sheriff), who will then forward a copy to the creditor. Then the creditor has 10 days from the time they receive the copy to dispute. If they dispute, then you go to a court hearing and hash out your current finances.

I was "lucky", my creditor did not reply to my exemption request, so I get my $$$ back. But again, I don't know if this also applies to the IRS, so check your state laws.

 

Releasing Wage and Bank Levies

Once a levy is place, it is imperative to move quickly. A wage levy attaches to the next paycheck and transfers to the IRS all money beyond current tax withholdings and the minimum exemption amounts. If you did not complete the exemption form, the IRS will end up with more than half you take-home pay. This prospect does not bode well for most people.

The bank levy is not so immediate, however, there is no minimum exemption amount. The IRS can and will take the entire bank balance and apply it to the delinquent tax. The reason the bank levy is not so immediate is because of the provisions of code section 6332(c).

This section provides that a bank must surrender the proceeds of a levy to the IRS after twenty-one days have lapsed from the date of the levy. This holding period allows the citizen to work with the IRS prior to the account being cleaned out. Most notably, it allows outstanding checks to be cleared before the IRS takes the money and causes those checks to bounce. Note, however, that before the bank will allow any checks to clear against an account under levy, it must obtain at least a partial release of levy from the IRS.



The general statutory guidelines for releasing levies against any propertyâ??including wages and bank accountsâ??is provided for in code section 6343. That statute reads in part as follows:

a) Under regulations prescribed by the Secretary, the Secretary shall release the levy upon all, or part of, the property or rights to property levied upon and shall promptly notify the person upon whom such levy was made (if any) that such levy has been released ifâ??

(1)(A) the liability for which such levy was made is satisfied or becomes unenforceable by reason of lapse of time,

(1)(B) release of such levy will facilitate the collection of such liability,

(1)(C) the taxpayer has entered into an agreement under section 6159 to satisfy such liability by means of installment payments, unless such agreement provides otherwise,

(1)(D) the Secretary has determined that such levy is creating an economic hardship due to the financial condition of the taxpayer, or

(1)(E) the fair market value of the property exceeds such liability and release of the levy on a part of such property could be made without hindering the collection of such liability.

As you can see from this language, the IRS must release a levy if there is an installment agreement in effect at the time of the levy and the citizen is not in violation of any of the terms of the agreement. Code section

6343(a)(1)(C).

If there is no such agreement in effect, there are two other provisions of this law that can provide relief from a levy. They are subsections (1)(B) and (1)(D). I address each of them.

Subsection (B) contains general language that can apply in any situation where the levy can be shown to do more harm than good to the IRSâ?? prospects of collecting. When collection will not be facilitated by the presence of the levy, it should be released. One example is where a company has an employment policy against enforced creditor collections. If you can show that continuation of the levy will lead to your losing your job by virtue of the employment policy, it can be said that the levy will not "facilitate collection." Obviously, you are less likely to pay the tax if you have no job.

This section is not limited to employment policies that might cause you to lose your job in the face of an IRS wage levy. As I said earlier, this is broad language that can apply in any situation where the levy is likely to do more harm than good. This subsection should be used when there are no facts that justify resorting to other subsections of the statute.

Subsection (1)(D) provides for release when the levy is causing an "economic hardship" due to your financial condition. This is the section that must be argued, either alone or in conjunction with others, to ensure that you obtain relief from the levy. However, it is not enough to merely "allege" economic hardship. You must be prepared to prove that your overall financial condition is such that the levy stands to wreck you.

The IRSâ?? regulations provide some guidance as to what constitutes "economic hardship." Revenue Regulation section 301.6343-1 (b)(4) provides:

****This condition applies if satisfaction of the levy in whole or in part will cause an individual taxpayer to be unable to pay his or her reasonable basic living expenses. The determination of a reasonable amount for basic living expenses will be made by the director and will vary according to the unique circumstances of the individual taxpayer. Unique circumstances, however, do not include the maintenance of an affluent or luxurious standard of living.

To win release of the levy under this provision, you must be prepared to submit a detailed financial statement to the IRS, usually on Form 433-A. This statement provides the information the IRS needs to determine your ability to pay. As I stated earlier, the IRS evaluates your living expenses in light of its national and local standards and generally, attempts to squeeze as much from you as possible.



In addition, the regulation provides that the IRS will take into consideration the following information for purposes of determining the extent to which a personâ??s living expenses are "reasonable:"

(A) The taxpayerâ??s age, employment status and history, ability to earn, number of dependents, and status as a dependent of someone else;

(B) The amount reasonably necessary for food, clothing, housing (including utilities, home-owner insurance, home- owner dues, and the like), medical expenses (including health insurance), transportation, current tax payments (including federal, state, and local), alimony, child support, or other court-ordered payments, and expenses necessary to the taxpayers production of income (such as dues for a trade union or professional organization, or child care payments which allow the taxpayer to be gainfully employed);

(C) The cost of living in the geographic area in which the taxpayer resides;

(D) The amount of property exempt from levy that is available to pay the taxpayers expenses;

(E) Any extraordinary circumstances such as special education expenses, a medical catastrophe, or natural disaster; and

(F) Any other factor that the taxpayer claims bears on economic hardship and brings to the attention of the director. Rev. Reg. section 301.6343-1 (b)(4)(ii)(A)-(F).



To make the presentation discussed here, submit a letter via certified mail to the office of the Taxpayer Advocate in your local district. Remember that the TA has a presence in the office of each district director throughout the nation. Be specific and detailed in your request and provide the information outlined above so the IRS can make a reasonable determination on the merits of your request. Be very clear and specific about the nature of the harm the levy is doing. It is not enough to make the conclusory allegation that the levy is causing "economic hardship." You should give examples, such as, you are unable to make a mortgage or auto payment, or, you have several outstanding checks that will bounce,

thereby destroying your good standing with merchants and creditors.

Make a specific and clear request that the levy be lifted immediately. Keep in mind that if you withhold information regarding your financial status and ability to pay, you will at least delay the process and likely, you will meet with denial of your request to release the levy.

Consistent with this observation, please note the language of Rev. Reg. section 301.6343-1(b)(4)(iii), which provides as follows:

In addition, in order to obtain a release of a levy under this subparagraph, the taxpayer must act in good faith. Examples of failure to act in good faith include, but are not limited to, falsifying financial information, inflating actual expenses or costs, or failing to make full disclosure of assets.

Hence, you cannot withhold information or misstate your financial condition and hope the IRS will release the levy

HTH,

clc

 

Thanks CLC,

Great job.



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Thank you, Butch! Posting here and another place gives me a respite from what I'm supposed to be doing...preparing for "May madness"! (I prefer not to disclose what that means as last time I did I was flamed...lol).

If Dolly would tell me what state she lives in I could point her to:

(C) The cost of living in the geographic area in which the taxpayer resides.

The IRS has charts that indicate what they consider "reasonable" living expenses for each area. The chart for Dolly would help her out before she talks to the TA in her district.

clc

 

The 21 days are probably still pending Dolly.

They usually clean out the accounts but hold the money in escrow, thus the zero balances.

You'll need to move fast tho.

You argument should be that levying your money will create irreversible hardship and make it impossible to pay your back taxes. Therefore, a release will facilitate your catching up.

They already understand that destroying your revenue source is counter productive to what they want, money. But you MUST make your argument.


GL



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Dolly,

I have listed below every site you need to prepare a 433 A in order to claim "hardship" plus the offices and telephone numbers for the IRS offices and the Tax Advocate.


IRS NATIONAL STANDARDS FOR FOOD & CLOTHING

http://www.irs.gov/businesses/small/article/0,,id=104627,00.html

IRS NATIONAL STANDARDS FOR HOUSING & CLOTHING

http://www.irs.gov/businesses/small/article/0,,id=104701,00.html

IRS NATIONAL STANDARDS FOR TRANSPORTATION EXPENSES

http://www.irs.gov/businesses/small/article/0,,id=104623,00.html

CA IRS OFFICES INCLUDING TELEPHONE #S AND TAX ADVOCATES' #S

http://www.irs.gov/localcontacts/article/0,,id=98259,00.html

Good luck and start dialing tomorrow!

clc

 

REALLY FANTASTIC advice - another example of people helping people - for no fee other than to help each other and feel good about it.

clc - nice work!

aarrff - dogman

 

are you using an attorney to deal with irs ? dealing with the irs is not a walk in the park, you need expert advice.

 

If Dolly could afford a tax attorney at $250-$400 an hour then the IRS would be less inclined to release the levy. Their reasoning would be if she can afford an atty where is the requisite "hardship".

She should first complete form 433 A which she can find below (you must have adobe acrobat reader to open this pdf document. If you don't you can download it free at http://www.adobe.com ). Once this form is complete she should then call the Tax Advocate with all the info ready as he/she will ask for this type of info over the phone. http://www.irs.gov/pub/irs-pdf/f433a.pdf

She should do this as quickly as possible in order that her bank account isn't raided again. The IRS levying power is great...they can even levy Social Security disability payments and pension plans...which no one else can touch.

So Dolly should complete the form paying attention to all the living standards I supplied and call the TA in her district as soon as possible.

clc

 

PS Dolly, you can ask for the money the IRS took from your accounts. My experience has been that it takes a lot of pleading to the Tax Advocate and even when he agrees (which I have seen them do before) it might take a couple of months or more. So the #1 priority is to convince the advocate not to take any more monies from your account. If possible I would close the account and only keep an account open in your husband's name or open an account in one of your children's name. The IRS then would be unable to levy those monies. But the next step would be the filing of a lien which would attach to all your personal property from the date of filing to the date of release which includes any property acquired after the date of the lien. Once a lien is satisified and released it will still show up on your credit report as "paid or released" for 7 years. So act quickly before they file a lien.

 

The IRS, in my own experience, is like a collection agency on steroids. Once the machine gets going, it's hard to stop.

You can count on a few things from them. First, if you make an agreement with them and you drop your end, they won't call or ask. They're not big on "communicating" in any way you would like - they get their message across by levying your bank accounts. They're the 800 lb gorilla and they will let you know that, everytime.

Get on the phone now and start asking what you can do. The chances are that if you explain your situation and your limitations and pick up the payment agreement - even if it's modified to be less than it was before - they'll release the levy.

You won't see the tax lien(s) on your CR for a while. They get filed in the courts and then get reported later.

I went through ten years of that nonsense and after five years of getting an Offer in Compromise rejected several times, I hired a professional and he advised me to do a Ch7 BK. One month later the war ended. It will take a while for my CR to recover from the Ch7, but I can tell you all the CAs in the world are *nothing* compared to having the IRS levy your accounts and seize whatever they can. Makes for fun conversations at work.

 

I agree with DanS...OICs are usually rejected unless you pay over 95% of the outstanding tax debt. Also during the time the OIC is pending the interest and penalties clock keeps on ticking.

DanS could also tell you the hassles of an OIC...submitting documents after documents ad infinitum ad nauseam and still getting rejected.

So Dolly start smilin' and dialin' ASAP before it goes to lien and before they grab any more of the monies you need to live on.

clc

 

I don't know where you got that statistic from. My average OIC is way less than 10% of the tax debt and I have a significantly higher acceptance percentage (80%) than COIC Memphis in general (6%).

 

Don't do this until AFTER you submit your 433-A tho.



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