Do IRS tax levies require a court order? Answer by Ken Golliher and Mary Beth Guard
Question: A customer is claiming that IRS tax levies are not valid unless accompanied by a court order. Have you heard of this?
Answer by Ken Gollier: BIO AND CONTACT INFO
No, and neither has the IRS.
The Taxpayer Bill of Rights provides substantial protections to the taxpayer, not the least of which is the 21 day holding period before the the funds are to be turned over. That time frame allows the customer to plead her position directly to the IRS or go to court if that is what she is so anxious to do.
It is the bank's job to notify the customer of the levy anyway, so develop a standard cover letter. Enclose a copy of the levy(front and back)with your letter.
In your letter, encourage the customer to read the levy in order to understand her rights. Note that you do not have any information beyond that contained in the levy and if the customer needs more she should consult with an attorney. Explain that the bank is only the stakeholder; it is not involved in the dispute and has no standing to contest the levy.
Finally, tell the customer which of her accounts is affected and what the bank is going to do. Point out that the levy only attaches to funds that were in the account on the day of the levy's receipt; funds deposited later may be used to pay outstanding checks.
Whether your customer has a misunderstanding with the IRS or she feuds with them as a hobby, you have no reason to be put in the middle. As we say in Kentucky, "You ain't got a dog in this fight." Stay out of it.
IRS tax levies sent to banks are never accompanied by court order.
For guidance on responding to levies, go to this page on BankersOnline and scroll down to the IRS Levy category. You'll find links to articles (and even a quiz!) there: http://www.bankersonline.com/infovault/i-infovault.html
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