If you have not been paying your taxes on time for whatever reason, the IRS may impose a bank levy on you. A bank levy is done by the IRS to reclaim back taxes that you have refused or are unable to pay back. Essentially, a bank levy is where your bank account is frozen by the IRS and used to pay off your tax debt. Your banker is obligated by law to comply with this IRS action. In order to avoid a bank levy, IRS methods work best. So take heed if you have received a letter from the IRS threatening a bank levy on you. Click here to watch or read more information on IRS Back Taxes.
The first thing to do is to prove to the IRS that a bank levy would result in severe hardship to you and your family. For the IRS to decide not to slap a bank levy on you, your hardship must be of a certain kind. To the IRS, hardship means that a bank levy will interfere in you or your family having basic food, shelter or the capacity to pay child support or medical bills. Other than those categories, the IRS will not offer a hardship suspension. Other forms of hardships do not count, such as not having the ability to pay your credit card bills, student loan payments or private school bills. These things are not considered essential enough by the IRS. To stop a bank levy, IRS officials must be shown proof of inability to meet basic needs as described above.
Another bank levy IRS tip is to go for a payment plan. The IRS is always willing to allow you to pay off your tax debt in installments. Most people who select this option actually cannot afford the payment plan, but it buys time until they can figure out a payment system that actually works.
The best way to stave off a bank levy, IRS officials say, is to offer a lump sum payment of about 80% of your total tax debt. For this to work, the IRS will calculate how much you can reasonably pay over the next year and get you to pay that amount, which usually is around 80% of what you owe. If you accept their proposal, the IRS will consider waiving the balance. If you want to avoid a bank levy, IRS officials will often go for the lump sum payment, but don’t expect to get away with anything under 60-70 percent. The IRS is more than willing to work with you, but only within reasonable circumstances.