Banks and other financial institutions are required to wait 21 days after the notice of IRS levy before turning your assets over to the Feds. Often banks jump the gun and turnover before the 21 days has run. Guess what? The IRS lacks statutory authority to return that money to the bank. How convenient is that?

The levy seizes (or freezes for 21 days) only the money in your account as of the date and time the levy is delivered to the appropriate bank officer. Cases have held that outstanding (but unpaid) checks cannot be subtracted from your bank balance in determining how much the levy has seized. Thus, at stake is your collected balance, without regard to floating checks. If the client deposits more after the levy is delivered, that amount is available to pay checks and is not subject to the levy (unless another is later served). Unlike a wage levy, other levies are not continuous. But apart from those later deposits, checks that are in the float on the day of the levy turn into rubber.

PLANNING NOTE:

When you learn of the levy, contact us immediately. We will contact the bank immediately to see (1) whether it has received the notice of levy, (2) if the bank is planning to hold the money for the 21-day period, and (3) how much they are freezing.

COMMENT:

The IRS is not required by law to notify you of a bank levy. They must notify you that they intend to levy, not when they have levied. They do so anyway, but they wait seven days after sending the levy to the bank. That’s just in case you had any ideas of withdrawing the money before the levy hit the bank.