How Much Money Can the IRS Take From Your Bank Account?
To understand the extent to which the IRS can levy your bank account, it's important to first consider the statute of limitations and the process involved in tax collection. Typically, the Internal Revenue Service (IRS) has a 10-year statute of limitations for collecting debts, meaning they can pursue payment for that period.
Can the IRS Take As Much As You Owe?
When you owe taxes, the IRS may levy your bank account to recover the amount owed. There is no set limit on how many times they can levy your account, and they typically continue this process until an arrangement is made to pay back the owed taxes. The IRS can seize a significant portion of the funds in your bank account, up to the full amount of the liability.
The Levy Process
The IRS follows a due process in determining your liability and the process for collecting it. When a bank account is levied, the funds are removed and held by the bank for 21 days, giving the taxpayer an opportunity to negotiate a payment plan with the IRS. If no agreement is reached, the funds are eventually forwarded to the IRS.
The first indication of a levy is usually a letter from the bank or rejection of debit transactions. Before a bank account is levied, you will receive at least six notices, including two certified notices sent to the most recent address provided to the IRS. Therefore, a bank levy should not come as a surprise, even though it often does.
Other Forms of Collection
The IRS has multiple methods of collecting unpaid taxes, and levying a bank account is just one of them. They can also place a tax lien on your assets, making it nearly impossible for you to use or transfer these assets. A tax lien can affect your credit rating and make it harder to secure loans or mortgages.
What Can You Do?
Getting in touch with the IRS as soon as possible is crucial. By initiating communication and making arrangements to pay, you can avoid further complications. The IRS offers several options, including installment agreements, where you pay back the owed taxes in manageable installments, or offers in compromise, which can result in a reduced payment amount if you can demonstrate financial hardship.
Understanding and following these steps can help mitigate the impact of IRS levies and can prevent further financial strain.
For more information and personalized guidance, consult a tax professional or the IRS directly. Your financial well-being is important, and taking proactive steps can help you manage your obligations effectively.