Understanding the Implications and How to Protect Yourself

The IRS, or Internal Revenue Service, plays a critical role in managing and enforcing federal tax laws in the United States. When a taxpayer fails to meet their tax obligations, the IRS has a range of powers to collect owed taxes. One such power is the ability to levy or seize assets, including bank accounts. But what happens when the bank account is joint—shared between spouses or business partners? Can the IRS levy a joint bank account, and if so, what does that mean for account holders?

In this article, we'll delve into the specifics of IRS levies on joint bank accounts and what you need to know to protect your financial assets.

What Is an IRS Levy?

An IRS levy is a legal action the agency can take to seize assets in order to satisfy unpaid taxes. This can include garnishing wages, seizing property, or taking funds from bank accounts. It's important to note that a levy is different from a lien; a lien is a claim against your property, while a levy is the actual seizure of assets to satisfy the debt.

The IRS typically issues a levy when taxpayers have ignored repeated notices and demands for payment. This can be a scary and stressful process, but understanding the details of how and when levies occur can help you avoid or address them more effectively.

Can the IRS Levy a Joint Bank Account?

The short answer is yes—the IRS can levy a joint bank account. However, the process is a bit more complicated when there are multiple account holders. In a joint account, the IRS can target the funds that belong to the taxpayer who owes the debt. If the account has funds from both parties, the IRS will generally only seize the amount belonging to the taxpayer with the tax debt.

This means that, in theory, the non-debtor party’s assets in the joint account could be at risk. However, there are safeguards in place that can help protect them.

What Happens When the IRS Levies a Joint Bank Account?

If the IRS decides to levy a joint bank account, they will send a notice to the bank, instructing them to freeze the account. The bank is then required to hold the funds for a period of time—typically 21 days—while the IRS processes the levy. If the debt isn’t resolved or the taxpayer takes no action, the bank will eventually turn over the funds.

Impact on the Non-Debtor Spouse or Co-Owner

If one of the co-owners of the joint bank account is not responsible for the tax debt, they may still face consequences. The IRS can claim the entire amount in the account, regardless of who contributed the funds, but they may provide some opportunity for the non-debtor party to dispute the seizure.

How to Protect Yourself if You Share a Bank Account

If you share a joint bank account with someone who has outstanding tax liabilities, there are a few steps you can take to protect yourself from the IRS levy:

1. Monitor the Account: Regularly check the balance of the joint account to ensure no unusual IRS actions are taking place.

2. Request a Separation of Funds: If you're in a situation where one account holder has tax debts, it’s advisable to separate your finances as much as possible. Consider opening individual accounts and transferring your funds out of the joint account.

3. Consult with a Tax Professional: If you’re worried about an IRS levy, consulting with a tax expert can help you understand your rights and options. They can help you explore potential solutions like an Offer in Compromise, installment plans, or Innocent Spouse Relief.

Can the Non-Debtor Party Be Held Liable?

One of the most common concerns for the non-debtor party is whether they could be held responsible for the debt. The answer largely depends on the nature of the levy and the funds in the account.

• Innocent Spouse Relief: If the non-debtor spouse can prove that they were unaware of the tax debt and had no involvement in the financial issues, they might be eligible for "Innocent Spouse Relief." This relief helps shield the innocent spouse from IRS levies or collections related to the debt of the other spouse.

• Challenging the Levy: If the IRS wrongly targets the non-debtor’s funds in a joint account, they can appeal or challenge the levy. A tax professional can assist in navigating this complex process.

What Should You Do if the IRS Levies Your Joint Bank Account?

If you find yourself in a situation where the IRS has levied a joint bank account, it’s crucial to act quickly. Here are the steps you should take:

1. Contact the IRS: The first step is to reach out to the IRS to discuss the levy. You may be able to set up a payment plan or resolve the issue before the funds are transferred.

2. Request a Release of the Levy: If you can prove the funds belong to the non-debtor party, you may request a release of the levy. This process can be challenging but is possible with the right documentation.

3. Consult a Tax Relief Firm: If you are facing significant challenges with the IRS, enlisting the help of a tax relief company, such as Fortress Tax Relief, can help. Our team has years of experience in helping clients navigate IRS levies and other collection actions, ensuring your case receives the personal attention it deserves.

Conclusion: Protecting Your Finances from IRS Levies

An IRS levy on a joint bank account can be a significant financial setback, especially if you are not the responsible taxpayer. While the IRS does have the authority to levy joint accounts, there are ways to protect yourself from having your funds seized.

Being proactive about managing your finances, consulting with professionals, and staying informed about your legal rights are key to protecting your assets. Remember, if you are facing IRS issues, Fortress Tax Relief is here to provide guidance and support to help resolve your tax problems and secure a better financial future.

Now that you know the risks and solutions, it’s time to take the necessary steps to protect your bank account and financial well-being from potential IRS actions.