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What Should I Do If IRS Freezes My Bank Account

Posted by on in Bank Account, Finances, The Internal Revenue Service | Comments Off on What Should I Do If IRS Freezes My Bank Account

The Internal Revenue Service might be a real nightmare for business people sometimes, having the authority to freeze your funds. Once the IRS issues the levy to your bank, the financial institution must comply by law. If you have unpaid taxes you might get a notice that your bank account has been frozen in order for the IRS to collect the unpaid taxes. Fortunately, it is a process and the better you understand it, the easier it will be for you to deal with it.  checking-account

There are several reasons as to why the IRS would freeze your bank account in the first place. Firstly, the taxpayer might not be responding to notices demanding payment. Secondly, it is used to collect the remaining balance due, and thirdly to offer a Compromise Agreement.

Your bank will receive a notice from the IRS and you will, too. Do not ignore the mail you receive from the IRS. The bank is obliged to retain your funds frozen for at least 15 days before paying it over to the IRS. This can give you enough time to negotiate releasing your funds. The IRS will release your funds if you pay the tax, penalty, or interest that you owe.  money-freeze

Even if you are not financially stable enough to comply with the demands of the IRS and pay the money you owe, it is essential for you to communicate with the IRS. You will receive multiple CP14 notices, but the IRS will not be able to freeze your bank account right away even if you do remain silent. Upon receiving a Final Notice of Intent to Levy, you will have 30 days remaining to contact the IRS either to pay the entire tax bill you owe, or to make payment arrangements.

The IRS can freeze the bank account or joint bank accounts that can be used to collect tax debt, but only on the day the levy takes place. Also, you will not be able to access your funds once the levy takes place. If you take no action your bank will send your funds to the IRS 21 days later. Another levy can also be issued if there is still need by the IRS.  frozen-money

If the bank account is suspicious it can also be frozen by the IRS. Under the Bank Secrecy Act of 1970 financial institutions are required to report all cash deposits exceeding $10,000 and file a suspicious activity report as an action to prevent laundering the money and fraud. A deposit just under $10,000 is also considered to be suspicious (for example $9,940 deposit) or a pattern of such deposits are considered to be a way to evade reporting crime. The IRS has the authority to freeze all such bank accounts in order to turn the information to the Justice Department for further investigation of the suspicious financial activities and make sure that there is no crime involved.

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