If you are on top of your tax debt situation, diligently review letters from the IRS when they arrive, and maintain good communication with your Revenue Officer or ACS, you have a huge advantage over people that don't. In short, you know what's coming.
One of things that any good tax representative does for clients, obviously, is to monitor these communications and stay on top of them. Properly timing deadlines and staying slightly ahead of the IRS is one of the attention to detail things that we do in order to get as much of a leg up as possible.
If you are doing this sort of monitoring yourself, chances are you will know when a bank account levy is coming. A bank account levy by the IRS requires your bank to take any and all funds in your account at the time the levy is processed, and hold them for 21 days. After that 21 days, the bank must forward these funds to the IRS. Deposits you make on the business day AFTER the levy is processed are not subject to the levy, only the funds in the account on the date that it hits are subject to the levy.
You can take advantage of this fact, coupled with how one bank in particular processes levies. I am by no means endorsing this particular bank and have no affiliation with them myself. However, Wells Fargo accounts have a benefit when it comes to being levied by the IRS. Wells Fargo receives all levy notices for all of their operations nationwide at a central office in Phoenix, AZ, which is where their legal processing team is. Due to the volume of incoming levies, it takes Wells Fargo 2 to 3 business days to process the levy and issue a copy to your local bank branch.
You can take advantage of this fact if, as previously mentioned, you are maintaining good communication with the IRS and diligently reviewing notices. Your mileage may vary, of course, but in my experience with clients it is not uncommon for the taxpayer to receive their copy of the levy notice BEFORE the Wells Fargo legal team has actually processed it.
What does this mean to you? If you know the levy is coming, it provides you an opportunity to make sure that no checks are going to bounce and to pull money out of the account before the levy actually hits.
You can use this strategy to protect yourself if you have cash flow, but are not financially able to become current with Federal tax deposits or estimated tax payments. While the IRS obviously frowns on this sort of action, for many people it may be their only choice to avoid losing their home or being unable to feed their families.
Jassen Bowman is an IRS-licensed Enrolled Agent, and assists small businesses and individuals with resolving IRS tax debts, creating tax-advantaged business processes, establishing systems and procedures for more efficient business operations, and implementing results-oriented lead generation campaigns to fuel revenue growth. For free tax and business operations consultations, call 970-930-1040.
In his free time, Jassen enjoys geocaching, ice dancing, and is a figure skating test judge.
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