Wednesday, April 17, 2019

HOW DOES THE IRS FIND MY WAGES AND BANK ACCOUNTS TO GARNISH AND LEVY?

Automated Collection Service, IRS Financial Statements, IRS levies and property seizures, Revenue Officers

Is the IRS getting ready to levy your bank accounts and wages?

If they are, how do they know where you bank and work?

In most cases, your bank or employer tells them.

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Sometimes, the information the IRS has to levy was supplied by you.

If you have a bank account that pays you interest, that interest is reported to the IRS on Form 1099 INT, along with the name of your bank.  Your bank isn’t reporting the information to the IRS because they want to, they are doing it because they have to. 

Tax laws require banks to tell the IRS the amount of money that they pay you.  The reason is to permit the IRS to make sure that you are reporting all of your income on your tax return.  But that information is also used by IRS collections to identify where you bank to levy your accounts.

The same is true of where you work.  If you are self-employed and work as an independent contractor, tax laws often require your customers to report the amount that they pay you to the IRS on Form 1099-MISC.  Again, the IRS uses this information as a match against your tax return to ensure that all of your income is on it. 

But the IRS database that contains the name and address of customers who paid you is also available to an IRS Revenue Officer or IRS Automated Collection Service employee to use to levy your pay.

An IRS levy on subcontractor pay is only valid on what you are owed at the time; they are not ongoing and continuous on future pay.

However, if you are employed and are paid wages, an IRS levy is continuous on every paycheck until the levy is released.  And your employment is reported to the IRS on Form W-2, and is made available to IRS collection personnel.

It is possible that you may have previously paid the IRS with a check, either as part of a prior installment agreement, or to pay the tax due on your tax return when you filed it.  Presume when you pay the IRS, they retain the banking information you provide them with your payment, and can use that to levy you.

Bear in mind the information that the IRS has about your bank accounts and wages is not absolutely, 100% current.  The IRS has the information from your prior years’ income and tax returns.  If they IRS wants to levy you in 2014, for example, they will be relying on information in their database that was reported to them on your 2013 taxes.  If you are no longer banking or employed at the same place you were previously, an IRS levy could go to an empty source.


Alternatively, you may have told the IRS where you bank or work.  If you call the IRS at their Automated Collection Service to discuss your tax debt, one of the first questions they will ask you is where you bank and work.  The purpose is to update their database and to ensure accurate forms of enforcement, if necessary.

The voluntary disclosure of where you bank and work is not necessarily a bad thing – many IRS collection cases require the full disclosure of your accounts and income for resolution.  Full cooperation is often necessary to get the bear off your back.  But if you disclose this to the IRS, and they did not previously have it, and you can’t come to an agreement, you have just given them ammunition to levy you.

Clients have reported to me that they have seen IRS inquiries appear on their credit report, and Internal Revenue Manual 5.19.4.3.5 permits the IRS to pull credit reports to secure levy sources.

It is possible that the IRS may not know where you bank or work, and can’t find it on their own.  You may not have a bank account, or maybe have one but it is not interest bearing. Maybe your customers do not report your income to the IRS.  Or the information the IRS has on your employment is no longer current.

Knowing who you are dealing with at the IRS also factors into an understanding of what the IRS can do with the information they have, and how they can acquire more information about you.  The IRS has two primary sources of collection enforcement:  Automated Collection Service, and local field collection personnel, known as Revenue Officers.

When you owe the IRS money, it is important to have an understanding of what the IRS already knows about you, and to understand the benefits and risks of telling them more. Benefits include an offer in compromise settlement, a payment plan, or even uncollectible status, where the IRS agrees that you cannot afford to make any payments and they do not levy to avoid creating a financial hardship.  Either way, it is good to know going in whether the degree of risk you face from what the IRS already knows.


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Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.

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