The Internal Revenue Service uses many tools in its attempts to collect unpaid tax debts. Once all of the options have been exhausted, the IRS may turn to issuing a bank levy against a person’s bank account. An IRS tax levy placed on your bank account is a serious action reserved for extreme cases where the taxpayer has repeatedly ignored all attempts to fulfill their tax obligations or is involved in fraudulent activities.

Bank Accounts the IRS Can’t Touch

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If you are in a position where you fear the IRS freezing or withdrawing funds from your bank account, you may be wondering, “Is there a bank account I can open that the IRS can’t touch?” Don’t worry, because you are not alone. Thousands of people search for the answer to this question and search for bank accounts the IRS can’t touch.

Essentially, the IRS typically doesn’t freeze financial accounts unless the person has an unpaid tax debt and has been dodging all communication attempts with the IRS. If you are in a position where you have an unpaid tax debt, unless you speak with someone at the IRS about repayment plans for the debt, you are at risk of the IRS issuing a bank levy.

The IRS can place a levy on any account you have with a financial institution, including checking and savings accounts and online banks, such as PayPal, Venmo, and Chime. Before the levy goes into effect, the IRS will send a 30-day notification warning you of the levy as a final attempt to get you to communicate with them and create a plan to pay the tax debt in full.

The IRS then notifies your bank, giving them notice that you have 21 days to resolve your tax debt. If there is no resolution, the bank will send the money in your account to the IRS at the end of the 21 days.

Frequently Asked Questions

Under what circumstances does the IRS freeze and confiscate bank accounts and other assets?

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Though the IRS has a reputation for immediately resorting to taking money from your bank account and seizing all of a person’s assets, they typically do not immediately do this. Before the IRS freezes or confiscates the funds in a bank account, they attempt to contact the person who owes an unpaid tax debt. If the taxpayer still has not responded or attempted to set up a payment plan after several notices have been sent, the IRS may start the process of levying the bank account.

After all communication attempts have been made, a Final Notice of Intent to Levy is mailed out to the taxpayer, who has a 30-day period to talk to the IRS to negotiate the amount and set up a payment plan.

What assets and property will not be touched by the IRS?

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Though the IRS has the authority to seize assets and freeze bank accounts, some assets, property, and income cannot be touched by the IRS.

Though by law, there are some forms of income the IRS cannot garnish, if this money is deposited into an account with an IRS levy attached to it, the government may still seize the money. Income and financial benefits that the IRS cannot touch include the following:

  • Veterans’ benefits
  • Combat pay
  • Welfare benefits
  • Income made at minimum wage
  • Child support payments
  • Foster care payments
  • Workers’ compensation
  • Unemployment benefits
  • Disability benefits
  • Casualty insurance
  • Payments from a State Crime Victims’ Fund
  • Inheritances
  • Black Lung Disease Benefits
  • Disaster Relief Grants
  • Public assistance benefits
  • Supplemental Security Income
  • Social Security benefits
  • Select retirement accounts
  • Municipal bonds interest
  • Compensatory damages awarded for sickness or personal injury
  • Gambling winnings (only if it offsets losses)
  • Gifts
  • (Limited) Vacation rental income
  • Life insurance death benefits

Assets and personal property the IRS cannot touch may include the following:

  • Clothing and shoes
  • Food
  • Schoolbooks
  • Household pets
  • Personal weapons
  • Work tools with a value at or below $3,520
  • Furniture with a value at or below $7,720
  • Personal effects with a value at or below $6,250
  • Assets with no equitable value
  • Personal residences (if you owe less than $5,000)
  • Assets held outside the United States

What assets can the IRS seize?

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In a United States jurisdiction, the IRS can confiscate any asset, including bank accounts (savings and checking), property, income, and real estate. The only exceptions are the assets and income listed above.

The list of items the IRS can seize is nearly endless and includes assets such as:

  • Real estate
  • Vehicles
  • Boats
  • Art
  • Wine
  • Antiques
  • Cryptocurrencies
  • Wages (through garnishments)
  • Checking and savings accounts

Can the IRS take all the money from your bank account?

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The IRS can take money from a person’s bank account, especially if they have been unresponsive to several attempts to collect an unpaid tax debt. Though rare, seizing money from a bank account is only used as a final attempt to get a taxpayer to pay or respond to notifications regarding an extremely past-due tax debt.

Can the IRS seize money from a joint bank account?

The IRS can place a levy on a joint or third-party bank account, even if the other person listed on the account is not liable for your tax debt. If your name is in a bank account, the IRS can seize the funds, even if the nonliable person has deposited money into the joint account. If this occurs, the nonliable party may contact the IRS to file a claim of ownership of the funds, and with proof, it might be possible to get the money back.

Can the IRS take money from my spouse’s account?

Even if your spouse is not listed on your tax returns or named as a liable party for your unpaid tax debt, depending upon your state’s laws, the IRS may be able to seize all of your spouse’s assets, including their bank accounts. In states that recognize marital community assets, the IRS can place a levy on your spouse’s assets, regardless of whether they are liable for the debt or not or whether the tax debt was incurred premarital or postmarital.

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Can the IRS seize your bank account without notice?

In most cases, the IRS sends multiple notices demanding payment, including a Notice of Intent to Levy, before seizing bank assets. However, there are some situations where if the IRS feels the assets are in jeopardy of disappearing, a levy can be used without notice.

Can the IRS see all of my checking and savings accounts?

Essentially, the IRS has access to all of your bank accounts, including online bank accounts. However, the IRS rarely seeks information about your bank accounts unless you are being audited or have an outstanding tax debt.

How does the IRS find a bank account?

The IRS can use the social security number you used on your tax return to search for bank accounts in your name. Since most banks require you to apply for an account using a Social Security number or a taxpayer identification number, it is easy for the IRS to search to see which accounts are opened in your name.

What should you do if the IRS or another government agency garnishes your bank account?

If the IRS has started garnishing money from your bank account, it is vital you contact them immediately. During your call, find a way to resolve your tax liability by either paying the balance in full or setting up a monthly payment plan. Once you have come to an agreement, request the levy be released so future deposits are no longer in jeopardy of being seized by the IRS.

How do I protect my bank account from the IRS?

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The best way to protect your bank account from an IRS levy is to address any tax issues immediately. Do not wait for the IRS to send several notices or attempts to collect the tax debt. Reach out to them as soon as a tax issue arises and establish a line of communication to ensure they are working on getting the debt paid off as quickly as possible.

If you are concerned about the IRS applying a levy against your bank accounts. In that case, it is best to speak with a tax attorney to learn more about your payment options, including negotiating the total debt amount. A tax attorney can guide you on what to do if you have a levy on your bank account and act on your behalf when negotiating the tax debt. Call your tax attorney today to learn more about your options and for advice on preventing the IRS from seizing your assets.

The responses below are not provided, commissioned, reviewed, approved, or otherwise endorsed by any financial entity or advertiser. It is not the advertiser’s responsibility to ensure all posts and/or questions are answered.

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