When dealing with tax debt, many taxpayers worry about the potential consequences of not paying what they owe to the IRS. One of the most concerning issues is whether the IRS can seize funds from a joint bank account. The IRS has several tools at its disposal to collect outstanding tax liabilities, and understanding these methods is crucial for taxpayers—especially those who hold joint accounts with a spouse or business partner. In this article, we will explore the possibility of an IRS levy on a joint bank account, shedding light on the facts, the rules, and the potential ways to protect your finances.
What Is an IRS Levy?
An IRS levy is a legal seizure of property to satisfy a tax debt. Unlike a lien, which is a legal claim against property, a levy actually allows the IRS to take assets like bank accounts, wages, or even physical property. Once a levy is in place, the IRS can seize funds from the taxpayer’s bank account, garnish wages, or sell assets.
Can the IRS Levy a Joint Bank Account?
Yes, the IRS can levy a joint bank account, but the process is nuanced. If one of the account holders owes back taxes, the IRS can attempt to seize funds from the entire account. However, the situation is more complex when the account is joint, as the other account holder, who may not be responsible for the tax debt, also has legal rights to the funds.
How Does the IRS Handle Joint Bank Accounts?
If the IRS places a levy on a joint account, it will typically only seize funds that belong to the individual taxpayer who owes the debt. This means that if you and your spouse or partner share a joint bank account, the IRS will first identify how much of the money in the account is yours alone. In many cases, the IRS may only seize half of the funds, especially if the other account holder has no connection to the tax debt.
However, things get complicated if the other account holder is found to have contributed to the account. The IRS may try to seize funds that belong to both account holders, particularly if it determines that both individuals share equal ownership of the account.
Protecting Your Joint Bank Account From an IRS Levy
If the IRS is threatening to levy your joint account, there are several potential steps you can take to protect your finances:
1. Negotiate With the IRS
The IRS may be willing to work with taxpayers who are proactive about resolving their debts. This could include negotiating payment plans, offers in compromise, or requesting a temporary delay in the levy. Working with a tax professional can help you explore these options.
2. Prove the Funds Are Not Yours
If you can demonstrate that the funds in the joint account belong entirely to the non-debtor spouse or partner, the IRS may be willing to lift the levy on those specific funds. You may need to provide documentation such as deposit records or a declaration from the other account holder.
3. Consider Separate Accounts
If possible, consider separating your finances by opening individual accounts. This can reduce the risk of joint assets being targeted by the IRS in the event of a levy. Keep in mind that this is not a foolproof solution, as the IRS may still be able to seize your assets under certain circumstances.
4. Seek Professional Help
Dealing with an IRS levy can be complicated and stressful, particularly when joint accounts are involved. Working with a tax relief professional or tax attorney can help ensure that your rights are protected and that you explore every option available to resolve your debt.
What Happens After an IRS Levy Is Placed on a Joint Account?
Once a levy is placed on a joint bank account, the financial institution must comply with the IRS’s instructions to freeze the account and transfer the funds to the IRS. The account holder will be notified of the levy, and there may be an opportunity to dispute it or negotiate a resolution. It’s important to act quickly if you find yourself in this situation to minimize potential disruptions to your finances.
Conclusion: What to Do If the IRS Levies Your Joint Bank Account?
The possibility of an IRS levy on a joint bank account can be unsettling, especially if the account is shared with a spouse or business partner who has no connection to the tax debt. Can the IRS levy a joint bank account, there are protections in place to ensure that only the liable taxpayer’s assets are affected.
If you’re facing an IRS levy, it’s essential to understand your rights and take action as soon as possible. Working with a tax professional can help you navigate the complexities of joint accounts and explore options for resolving your tax issues without unnecessary financial disruption. Don’t let a tax levy cause undue stress—take control of your situation and seek the help you need to secure a resolution.
For more assistance with tax relief and resolving IRS issues, contact Fortress Tax Relief—a trusted ally in helping taxpayers find solutions to their financial challenges since 2003.
