November 16, 2009 by Jay Freeborne

This morning, I had a panicked call from a customer I helped this summer from Iowa.   Earlier this year, we helped this client get "currently not collectible" status on his 941 payroll tax debt.  Or so we thought?!

"Jay, they levied my bank accounts again."

"What?!" I said, "Impossible.  It wasn't the IRS that did it.  It must have been the State of Iowa."

"No, Jay.  It says the 'IRS.'"

After he faxed me the paperwork, I saw that the Iowan was right:  the IRS had levied his bank account and sent out a cashier's check for $6958.00, made out to the IRS, for all of the money in his account.  However,  upon closer review, the NOTICE OF LEVY was dated June 22, 2009.  My colleague at Washington Tax Services, Matt Woare, had the right analysis:  this was a bank error!

Important note:  bank levies are one-time events that affect only monies in your account ON THE DAY the levy is received.

Apparently, the levy notice sat in a bank clerk's in-box for five months until she noticed it.  At my customer's insistence, she called me today, and carefully, I explained to her the law -- of course -- telling her to call the IRS  for verification.  Fortunately, she had not sent the check to the IRS yet! 

This wouldn't be the first time that we have seen small town banks incorrectly enforce a bank levy.  Most large banks don't make this kind of error.

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