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Bank Levy and Wage Garnishment Law

Jul 9, 2008
Bank levy is seizure of money lying in the bank account of the tax payer. In all cases of levy, thirty days notice is given by the IRS to the tax payer. This is the final notice for intent to levy and this gives the tax payer a chance to seek relief from proposed action by asking for collection due process hearing.

In the case of bank levy, there is another opportunity as the bank is not required to hand over the money lying in the tax payer's account immediately. The money is required to be paid after twenty one days and this period can be utilized by the tax payer to negotiate with the IRS or work out a plan for payment of tax.

However, while this may lead to relief from future levy action it is unlikely to lead to withdrawal of levy action already taken unless the entire tax debt is cleared immediately.

The silver lining to bank levy is that it is not a continuous levy. Once the money lying in the bank account on the day of the levy is paid up to the IRS, the bank account can be operated normally. Future deposits in the bank account are not required to be handed over to the IRS unless, of course, another levy is done on the bank account.

A wage garnishment, on the other hand, is a continuous levy. The wages of the tax payer are required to be handed over to the IRS on a monthly or weekly basis depending on when it becomes due for payment.

One levy order from the IRS is enough to seize the wages repeatedly every week or every month until the entire taxes are recovered along with interest and penalty. The employer or the bank on which the levy order is served have no choice in the matter.

If the money due to the tax payer is not handed over to the IRS, they are treated as defaulters for the levied amount. In the case of wages, however, the law does not require the entire wages to be turned over to the IRS. Certain amount required for the basic living needs of the tax payer are exempted from the levy.

The tax payer has to furnish information in the matter through his employer. Apart from basic living expenses, the statutory payments such as child care payments or alimony are also exempted. Publication 1494 of the IRS gives the tables for figuring the exempt amounts.

While wage garnishment can spoil a person's reputation at the work place, his employer cannot fire him for this reason. The law provides protection against this. The bank also has to provide all the services as before.

Nevertheless, it is best to avoid the above situation by negotiating a plan of payment of tax dues with the IRS well before the matters go out of hand. You should remember "A Levy is a legal seizure of your property to satisfy a tax debt. Levies are different liens."
About the Author
Neil Lemons represents Allied Tax Solutions, a 30 year IRS tax representation firm with ex-IRS agents that help you get your life back. To learn more on wage garnishment and wage levy laws, check out http://www.alliedtaxsolutions.com.
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