When dealing with the IRS and tax liabilities, many Americans are concerned about the possibility of losing access to their bank accounts. One common question that arises is: Can the IRS levy a joint bank account? The answer is not straightforward, as it depends on a few important factors that taxpayers need to understand. In this article, we will break down the concept of IRS levies, explain how they affect joint accounts, and discuss potential steps you can take to protect your assets.
Understanding IRS Levies
An IRS levy is a legal seizure of property to satisfy a tax debt. Unlike a tax lien, which is a claim against your property, a levy allows the IRS to take actual possession of your property, such as wages, bank accounts, or even your car. This action is typically a last resort after other attempts to collect the debt have failed, such as sending notices and giving you opportunities to pay or arrange for a payment plan.
What Is a Joint Bank Account?
A joint bank account is an account held by two or more individuals, typically a married couple, but it can also include business partners or other relationships. Both account holders have equal access to the funds, and both can make withdrawals, deposits, and transfers. However, when it comes to IRS levies, the rules change based on the ownership and the taxpayer's responsibility for the debt.
Can the IRS Levy a Joint Bank Account?
Yes, the IRS can levy a joint bank account, but itÍs important to note that they can only take the portion of the account that belongs to the taxpayer with the unpaid tax liability. This can get complicated if both account holders are liable for taxes, as the IRS will typically seize funds from the account to satisfy the debt of the responsible party.
How the IRS Determines Which Funds to Levy
The IRS typically follows these guidelines when levying a joint account:
If both account holders owe taxes: The IRS will have the right to seize the entire account balance, regardless of who deposited the money.
If only one account holder owes taxes: The IRS will try to seize only the portion of the account that belongs to the taxpayer with the unpaid taxes. However, in practice, the bank might freeze the entire account, and it will be up to the taxpayer to prove the ownership of funds.
For example, if one account holder owes back taxes and the other does not, the IRS could levy the entire account, and the non-liable person would need to show that certain funds were theirs, not the liable partyÍs.
What Can You Do to Protect Your Joint Account?
If you're concerned about the IRS potentially levying your joint account, there are several steps you can take to protect your assets:
Establish Separate Accounts: If one spouse or account holder has tax issues, itÍs best to keep separate bank accounts. This way, only the liable individualÍs account is at risk in the event of a levy.
Provide Proof of Ownership: If the IRS has levied your joint account, you can dispute the levy by providing evidence of who owns the funds. This might include providing proof of deposits and showing that your share of the account balance is separate from the liable partyÍs.
Seek Professional Help: If you're facing a potential IRS levy or already have one in place, seeking help from a tax relief expert can help you navigate the complexities of the situation. Professionals can assist in negotiating with the IRS, potentially reducing the levy amount or helping to set up a payment plan.
IRS Levies and Bank Account Freezes
In many cases, when the IRS issues a levy, the bank will freeze the account for 21 days. During this time, you can try to resolve the issue by proving that the funds in the account donÍt belong to the taxpayer with the unpaid taxes. If successful, the bank will release the funds. If not, the bank will send the funds to the IRS to cover the tax liability.
What Happens If the IRS Levies the Entire Account?
If the IRS seizes the full balance of your joint account, both account holders might face consequences. However, if one account holder is not liable for the tax debt, they may be able to reclaim their portion of the funds through a process called "Innocent Spouse Relief." This provision allows a spouse who is not responsible for the debt to be relieved of the levy on their share of the account.
Conclusion: What Should You Do Next?
Dealing with the IRS and potential levies can be a stressful experience, especially when it involves joint bank accounts. ItÍs crucial to understand the rules surrounding IRS levies and to take steps to protect your assets. If you're unsure about your rights or need help navigating a tax debt, reaching out to tax relief experts like Fortress Tax Relief can provide you with the guidance and support needed to find a solution.
Taking proactive measuresÑsuch as separating your accounts, keeping detailed records, and seeking professional adviceÑcan minimize the risk of a levy and ensure that your assets remain protected. DonÍt wait until itÍs too lateÑact now to safeguard your financial future.
