Can the IRS Freeze Your Bank Account?
We get the question "Can the IRS Freeze Your Bank Account?" and here's what you need to know!
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Can the IRS Freeze Your Bank Account?
Yes, the IRS can Freeze Your Bank Account but only for certain reasons and not without advance notice.
The IRS has full authority to freeze your bank accounts for the following reasons: you have delinquent tax payments, or in other words, unpaid taxes OR you have violated the Bank Secrecy Act of 1970.
Reasons the IRS can Freeze Your Bank Account
Unpaid Taxes
Although this doesn’t happen often, it is important to make sure you communicate with the IRS if you are unable to pay your tax bills.
Sometimes they will work with you and put you on a payment plan or at least give you more time to pay your outstanding dues.
However, whether or not you communicate with the IRS, once your delinquent taxes go over a certain amount of days past due, the IRS will take further action to collect on the debts owed to them.
You will first receive a series of CP-14 notices called “Final Notice of Intent to Levy” from the IRS.
These notices are basically your final warning that you have 30 days to contact the IRS and either make some sort of payment arrangements or pay your delinquent taxes.
If no action is taken, the IRS will then issue a notice to the bank to freeze your account(s).
Both individual or joint bank accounts can be frozen by the IRS.
Once the account(s) are frozen, a 21 day period will pass and then the bank will send your money to the IRS.
If the amount in your bank account(s) doesn’t cover the entire tax bill, the IRS can issue another Levy and collect more money as it comes in.
Bank Secrecy Act of 1970 Violations
The Bank Secrecy Act of 1970 was created to ensure that financial institutions report any deposits over $10,000 and file suspicious activity reports if they believe a customer is trying to avoid these reporting requirements.
For example, if a customer makes multiple deposits that are just slightly under $10,000, such as $9,950 or $9,990, they could be laundering money or committing check or wire fraud.
Or they could simply be omitting to report these deposits as income to avoid paying taxes, all of which are illegal.
If the bank reports the customer activity to the IRS on suspicion of violating the Bank Secrecy Act of 1970, the IRS may freeze the bank accounts until a further investigation is done by the Department of Justice.
Conclusion
If you believe your accounts are at risk of being frozen by the IRS, the best thing you can do is speak to a tax attorney or contact the IRS regarding immediately.
Ignoring notices from the IRS could lead to your accounts being frozen or worse, further legal action if they believe you violated the Bank Secrecy Act of 1970.
In other words, pay your taxes and if you can’t, set up a payment plan with the IRS and lastly, don’t try to evade taxes or engage in any criminal activity.
The last thing you want to do is get on the bad side of the IRS.
