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IRS Tax Levy-Available Funds to Hold

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Question: 
Currently, when we receive a IRS Tax Levy, we look at the Social Security Number or EIN Number on the Levy and the name. We then research this information in our system to see if they have an account(s) and what funds are available to hold on the day the Levy is presented. We base this on the Name and EIN or Social Security Number provided on the Levy. My question is if we perform our search and determine that the primary name and Social Security number on the account does not match the Levy but the person the Levy pertains to is a signer or secondary owner to the account (Joint Account), should we hold those funds? Should this be done even if it's a Business, Minor Account, IOLTA, Escrow etc.? I would think consideration should be given to the relationship the person upon whom the Levy is presented has to the account.
Answer: 

Generally, if the person named in the levy is an owner on the account, the levy attaches.

There is no legal distinction between the "primary" and the "secondary" owner on a joint account. One owner is named first, the other owner is named second, nothing more. A levy in the name of either owner attaches.

There is also no distinction between whether the account is "business" or "personal." Again, the issue is ownership. A levy in the name and SSN of "John Doe" attaches to a sole proprietorship account "John Doe dba Bright Ideas" regardless of whether the account reflects John's SSN or an EIN. However, that same levy would not attach to the account of a corporation, partnership, or LLC on which John Doe was an authorized signer. That is true even if John was the sole shareholder of the corporation, a partner in the partnership, or even the sole member of the LLC. In those examples it is the entity that owns the funds, not the individual.

Obviously, that carries over to fiduciary relationships. Even though someone has exclusive control over the funds, the title and the documentation may tell you he is not the owner.

In processing third party claims you are depending on your co-workers to properly title and document accounts.

First published on BankersOnline.com 8/22/11

First published on 08/22/2011

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