Do you owe money to the IRS? If so, you may have to deal with a bank levy if you fail to make your payments on time.
A bank levy is a legal action that lets your creditors freeze your bank accounts and withdraw funds to cover your debt. Creditors typically need a court order to do this, but once they have one, they can begin withdrawing money from your accounts to cover your debts. If you’re concerned this could happen to you, avoid a bank levy with these tips.
Hire a Professional to Help
Once a bank levy is in place, you have 21 days to take steps to reverse the judgment. To do this, you need to work with an attorney, preferably one who specializes in tax law or another tax professional. If you’re struggling with a bank levy, call a professional for help. He or she can quickly address the issue by guiding you through the next steps.
Negotiate a Payment Plan
Letting the IRS know that you intend to make every effort to pay your tax bill can go a long way. Work on setting up a payment plan for your debt with the IRS. Your plan will include monthly installments that fit within your budget based on a proposal that you submit to the IRS. This is the best way to deal with a bank levy since it gives you an extended time frame to pay your debt without excessive fees or drastic steps. You may need to set up automatic withdrawals for monthly payments from your bank account.
Settle Your Tax Debt
If you can’t reach an agreement on a payment plan, you still have options. In some cases, you may be able to make an offer in compromise with the IRS. This is a settlement that allows you to pay off your debt for less than the full amount you owe. You’ll need to prove that paying your full tax debt will lead to an immediate economic hardship in order to use this option. You must be able to pay the settlement total within a reasonable amount of time either through a lump sum or periodic payments.
File for Bankruptcy
If you are unable to negotiate a payment plan and your offer in compromise is rejected, you may want to consider bankruptcy. There are different types of bankruptcy, so you’ll want a bankruptcy lawyer to assist you in filing. Bankruptcy stays on your record for many years, so this should only be used if you are in a dire financial situation.
Look Into State-Specific Rules
While you’re working with a professional to come up with a plan, take into account where you live. In addition to the steps listed above, look into the bank levy laws for your state since they do vary. Those rules determine the circumstances under which the money in your accounts can be withdrawn by your creditors. For example, in some states, the IRS is unable to garnish funds from certain sources, such as Social Security benefits, disability benefits, unemployment benefits, or child support payments.
A bank levy can feel very overwhelming at first, but with the help of a professional, you can tackle your debt and get your finances in order.
Image via Flickr by Bestpicko