When facing tax debt, the IRS has several tools to collect payments. One of the most powerful methods is a bank levy. However, if you’re married or have a joint account with someone, can the IRS levy a joint bank account? While it may seem like the IRS can only go after the person who owes taxes, joint bank accounts are treated differently.
The IRS can, in fact, levy a joint bank account. On the other hand, the way it works depends on a few factors. Let’s take a look at what happens when the IRS targets a shared account and what your rights are in this situation.
What Is a Bank Levy?
A bank levy is a legal action taken by the IRS to seize funds directly from your bank account in order to pay off unpaid taxes.
Before initiating a levy, the IRS sends a series of notices, including a Notice and Demand for Payment. If the debt remains unpaid and no arrangements are made, the IRS can issue a levy.
Once the levy is in place, the bank will freeze the account and hold the funds for a period, typically 21 days. If the debt isn’t resolved, the IRS will take the funds to satisfy the tax debt.
Can the IRS Levy a Joint Bank Account?
The IRS can levy a joint bank account. However, the way it impacts the account depends on the circumstances. In a joint account, both account holders are considered equal owners of the account, regardless of who deposited the money or who owes taxes.
If one of the account holders has a tax liability, the IRS can seize the funds in the account, including those that belong to the non-liable person. This means even if you don’t owe taxes, the IRS may still take your money from a joint account if your spouse or partner has a debt.
IRS Rules for Joint Bank Accounts
The IRS sees both individuals in a joint account as joint owners. Here’s how it works:
Taxpayer’s Liability
If only one person in the joint account owes taxes, the IRS can still seize the funds. The agency does not differentiate who deposited the money into the account. All funds in the account may be subject to seizure.
Partial Release
The non-liable person can potentially request a partial release of the levy for the funds that belong solely to them. This requires proving that the funds in question are theirs. This can be a difficult process, especially if both parties contribute to the account.
Liability for the Debt
The IRS may take money from the entire account, even if the funds belong to the non-liable person. The IRS’s view is that both individuals are equally responsible for the funds in the account.
What Can You Do to Protect Your Joint Account?
Open Separate Accounts
To avoid risking your funds, consider separating your finances. If you and your spouse or business partner have a joint account and only one of you owes taxes, opening individual accounts can help protect your assets from the IRS.
Pay Off Your Taxes
The best way to avoid a bank levy is to pay off your tax debt. If you cannot pay the full amount at once, contact the IRS and discuss payment plans, which might prevent the need for a levy.
Innocent Spouse Relief
If your spouse or partner owes the taxes, you may qualify for IRS Innocent Spouse Relief. This is a program that protects individuals who were unaware of the tax liability and were not responsible for the underpayment.
If you qualify, the IRS may release the levy and stop further collection action.
Dispute the Levy
If the IRS has already placed a levy on your joint account, and you believe the funds in the account belong to the non-liable party, you can dispute the levy.
To do this, you must prove that the money belongs to you. This could involve showing bank statements or other evidence.
Request a Levy Release
If the IRS levies your joint account, you may request a levy release. If you can show that some funds are not part of the liable person’s debt, the IRS may agree to release those funds. However, this can be complicated and might require the assistance of a tax professional.
What Happens After the IRS Issues a Levy?
Once the IRS places a levy on a joint bank account, the bank will freeze the account and hold the funds for up to 21 days. During this period, the account holders can work to resolve the debt, either by paying the taxes owed, negotiating a payment plan, or disputing the levy.
If the tax debt isn’t resolved within 21 days, the IRS will seize the funds from the account to satisfy the debt. The IRS is not required to return the money unless the levy is successfully disputed or released.
Can You Appeal an IRS Bank Levy?
Yes, you can appeal an IRS bank levy. After receiving the Notice of Levy, you typically have 30 days to file an appeal with the IRS Office of Appeals. You can argue that the levy should not have been applied or that you have a legitimate reason for the funds to be released.
In the appeal process, you will need to provide evidence to support your claim. If the appeal is successful, the IRS may release the levy or reduce the amount of the funds seized.
What Can You Do After the IRS Levies Your Joint Account?
Prove Ownership
If the funds in the account belong to you and not the liable person, you can provide evidence (e.g., bank statements) to show that the money is yours. The IRS may release the levy if they find that the funds are not subject to the tax debt.
Pay the Debt
If you are able to, paying off the tax debt can immediately stop the levy. You can also arrange a payment plan with the IRS if you cannot afford the full amount.
Tax Relief Options
You may qualify for relief programs, such as Currently Not Collectible status or an Offer in Compromise. These programs can either temporarily stop the levy or reduce the amount owed.
Take Action Against IRS Bank Levies with Rush Tax Resolution
If you’re facing an IRS bank levy or dealing with tax issues related to a joint bank account, Rush Tax Resolution is here to help. Our expert tax attorneys have years of experience working directly with the IRS to protect your assets and resolve your tax problems.
If you’re looking to stop a bank levy, remove a tax lien, or explore other tax relief options, we’re ready to guide you through the process. Call us now at 855-477-2255 for a free consultation. Let Rush Tax Resolution help you regain control of your financial future.