A tax levy is a legal seizure of your property to satisfy a tax debt. In contrast to a lien (used as security for the tax debt), a levy actually takes the property to satisfy the debt. The IRS may levy against property such as real estate, automobiles, business assets, bank accounts, and wages upon issuing a Notice of Intent to Levy CP504 / CP504b.
Tax Tip – You should never wait to respond to an IRS levy notice CP 504 – even if you do not plan on paying, you should consider your options, including payment arrangements, request for a hearing and remedies that may overturn the levy.
When the IRS levies a bank account, the bank freezes the account for the amount of the tax deficiency. Joint account owners then have 21 days to demonstrate their ownership share not subject to the levy, before the bank remits the frozen bank account proceeds to the IRS, consistent with the CP 504b Notice.
Tax Tip – For effective asset protection, a taxpayer who operates a business should have a separate business banking account to prevent interruption should their personal accounts be frozen.