What Is an IRS Lien on a Bank Account?

Taxpayers are required by law to adhere to Internal Revenue Service (IRS) deadlines for paying past due federal taxes owed. For individual taxpayers, the due date for paying all taxes owed is April 15th. If taxpayers do not pay their taxes, then the IRS can pursue their assets to make up the difference for the remainder of the taxes left unpaid. Issuing a levy or a lien on your bank account is one method for ensuring that the tax owed is collected by the IRS.

Significance

If you owe the IRS back taxes, it takes enforcement action against you. That enforcement action could take a variety of forms. A lien is a process whereby the IRS secures its interest in a taxpayer’s property. A levy is an actual seizure of a taxpayer’s property to pay taxes owed.

Process

As stated, a lien is a claim against your property. If the IRS issues a lien against your bank, then the IRS will also notify your creditors that it has a right to a portion of the funds in the account but will not confiscate the funds. However, more often than not, the IRS issues a levy, not a lien, on a taxpayer’s bank account. In cases where accounts are levied, the IRS applies all of the funds in the taxpayer’s bank account to the taxes owed. Only the money currently in the account at the time of the levy, and not future deposits, will be sent to the IRS.

Requirements

Before the IRS can issue a levy or lien, it must first send you a demand for payment notice. The notice will detail the full amount that you owe, plus penalties and interest. You have 10 days from the date of your notice to pay the taxes owed or make arrangements to pay. To make payment arrangements, complete IRS form 9465, "Request for an Installment Agreement," and mail it to the IRS office that processes returns for your area.

Appeals

If you believe that a lien was issued in error, then you can appeal the lien through the IRS Office of Appeals. Penalties and interest continue to accrue during the appeals process. The IRS is required to mail you a notice of lien filing within five days of the date of the filing, and you have 30 days (plus the five for mailing) to file a claim with the IRS Office of Appeals. Complete IRS Form 12153 and mail it to the IRS office that sent you your lien or levy notice.

Warning

Once a federal lien is issued, it will not be removed until the debt is paid in full or the statute of limitations (10 years) has expired. During that period, the IRS can continue to pursue collection of your assets to pay your tax owed.