Many taxpayers don’t appreciate the severity of consequences when they receive a notice of levy from the IRS. As these notices are regularly sent for delinquent taxes, enrolled agents have a steady volume of clients with the same problem. That is, enforcement of the levy causes a taxpayer’s bank to send money to the IRS that’s gone forever.
In order to stop execution of the levy, the bank must receive a release of levy from the IRS. A taxpayer has only 21 days to act before the bank forwards to the IRS the money in the account. Therefore, anyone with a notice of levy must respond quickly. They need to receive help from a tax expert who has completed an enrolled agent course.
This situation is a basic issue for enrolled agents to promote themselves as a solution. After passing the enrolled agent exam, your expertise is called upon for many tax matters. But common cases repeatedly demanding enrolled agent expertise involve the notice of levy.
The IRS sends nearly 4,000,000 levy notices per year. Every notice starts the 21-day clock requiring swift action to stop. Effectively fighting the implementation of the levy is seldom effective if taxpayers act alone. Worse still is the possibility that they will say something self-incriminating when trying to argue their way out of the levy.
A notice of levy usually arrives after ignoring prior IRS correspondence. The levy allows the IRS to seize various assets as payment toward back taxes owed. This includes all bank accounts tied to the taxpayer’s Social Security number or with the taxpayer’s name, even if the funds really belong to a joint account holder. Retirement accounts are not exempt from this collection effort.
Usually, a bank levy in only a single-day event. The bank sends whatever money is in the taxpayer’s accounts on the particular day of levy execution. The bank has only 21 days from receiving the notice to send the money. But the IRS can strike back with another future levy on new money deposited.
The only way to stop the cycle is for an enrolled agent to permanently resolve the tax debt. The standard defenses for obtaining a release of levy are that the levy will render the taxpayer unable to meet basic needs and the taxpayer received no prior notices with an opportunity to dispute the assessed tax liability.
Occasionally, extra time is requested for the taxpayer to submit a request for relief as an innocent spouse or to prepare evidence for a reasonable collection option. These are both actions that you will conduct for taxpayers after completing the enrolled agent test. The IRS usually grants a release of levy when the assistance of tax professionals is utilized to develop a resolution of the tax debt. Taxpayers need to know this in order to obtain help that will succeed with stopping an IRS levy.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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