Highlights and key takeaways
- The IRS can't take money from your bank account without notice, but it can levy your bank account after following a specific process involving multiple notices.
- The IRS sends a Notice of Intent to Levy before taking money from your account or garnishing your wages.
- You can stop the IRS from taking money by paying the debt, setting up an installment agreement, or requesting a Collection Due Process Hearing.
Here's an overview of the IRS collections process
The IRS collection process looks like this:
- The IRS sends a bill along with a notice explaining the options you have available for dealing with your tax debt.
- When you don’t respond to the first or subsequent notices, you might receive a call or a visit from a revenue officer. The IRS may file a federal tax lien on your assets. A lien is a legal claim against your property, ensuring the IRS gets paid if you sell the property or file bankruptcy.
- Once a lien is in place and you still haven’t responded to its attempts to collect the tax due, the IRS sends a CP405, Notice of Intent to Levy, alerting you that they may seize your property if the debt remains unresolved.
- Next up is Letter 1058, Final Notice of Intent to Levy, typically sent at least 30 days before the IRS takes action. It gives you a last chance to pay your back taxes, set up a payment plan, or request a hearing (more on hearings later).
The IRS can proceed with a bank levy if you don't respond to these notices. A bank levy allows the IRS to withdraw funds directly from your bank account to cover your tax debt. When the IRS issues a levy, your bank holds the funds for 21 days before transferring them to the IRS, giving you a brief window to resolve the issue.
The IRS can garnish your wages, too.
Wage garnishments are another way the IRS collects unpaid taxes. When the IRS issues a wage garnishment, an employer must withhold a portion of an employee's paycheck and send it directly to the IRS to satisfy tax debts.
The process is straightforward for employees—the employer receives a notice from the IRS and is legally obligated to comply. However, the situation is a bit more complex if you’re a business owner who receives a salary through your corporation or limited liability company (LLC).
In this case, you act as both employer and employee, meaning you must garnish your own wages according to the IRS's instructions. This can feel awkward, but ignoring the IRS can lead to further penalties, including more aggressive collection actions.
Now, let’s talk about what you can do to stop bank levies and wage garnishments from happening.
Further reading: 5 Ways to Pay Off IRS Tax Debt
How to stop the IRS from taking money from your bank account
You have several options for stopping an IRS bank levy or wage garnishment. The most straightforward option is to pay your tax debt in full. If that's not feasible, you can set up an IRS installment agreement, which allows you to pay off your debt in monthly installments. This stops the levy process and avoids further collection actions.
Another option is challenging the levy action or wage garnishment through a Collection Due Process (CDP) hearing. To request a CDP hearing, you must act quickly—within 30 days of receiving the Final Notice of Intent to Levy. During this hearing, you can present your case, negotiate payment terms, or dispute the tax debt. It's an opportunity to work with the IRS and potentially stop the levy before it happens. You can request a CDP hearing by submitting Form 12153.
Get help from a tax advisor or tax resolution firm if you're uncomfortable dealing with the IRS or feel overwhelmed by your tax debt situation. These professionals can guide you through the process, represent you before the IRS, and help you find the best solution to your tax problems.
So, what can you do if the IRS already took your money without notice? We’ll cover that next.
What if the IRS took money from my account without telling me?
It’s important to act quickly to address the situation if you believe the IRS took money from your bank account without notice. First, confirm that you didn't receive any required notices, such as the Notice of Intent to Levy or the Final Notice. Sometimes, you might miss these notices if you’ve changed addresses, they got lost in the mail, or you didn't open the envelope.
Next, contact the IRS directly to request a reversal of the levy. You can explain that you didn't receive the necessary notices and ask them to return the funds. Be prepared to provide evidence, such as copies of recent correspondence or proof of your current address, to support your claim.
You can request a Collection Appeals Program (CAP) hearing if contacting the IRS directly doesn't work. These hearings allow you to contest the levy.
You have to act fast, though. You must file Form 9423 to request an appeal, and it has to be postmarked within three business days of your discussion with an IRS collection manager. A tax advisor or tax attorney can help with the process.
How Bench can help
Catching up on your bookkeeping is the first step in catching up on overdue taxes and clearing up any tax debt. This is where Bench comes in. Our team can handle years of incomplete or missing bookkeeping, quickly bringing your financial records up to date. Even if your records are incomplete or in disarray, we can rebuild them and provide accurate, up-to-date financial statements.
With your books completed, you gain a clear picture of your financial situation. You can easily identify tax deductions and tax credits to claim on your tax returns, potentially lowering your overall tax bill and making it easier to settle your debt with the IRS. This proactive step helps you avoid the stress of IRS levies and sets your business up for a more secure financial future.
Learn more or book a call to talk to a back taxes expert for free.
