When you owe money in taxes, the IRS has many tools at its disposal to attempt to collect the delinquency. One such tool is to place a levy on your bank account or wages. But how does the IRS find the information it needs in order to place such a levy? The answer may be simpler than you think.
Three Ways the IRS Can Find Your Bank Account or Place of Employment
There are very few secrets when it comes to the federal government. If you are collecting wages or have assets in a bank account, they will find out. Here's how:
- From your bank. If you have a bank that is paying you interest, that interest is then reported to the Internal Revenue Service on an annual basis using form 1099-INT. This form also reveals the name of the bank. All banks are required by law to report the amount of money they pay you to the IRS in order to make sure you are reporting all of your income on your tax returns. This information can be used by the IRS to identify your bank and levy your accounts.
- From your employer. If you are an employee of a company and are paid wages, your employer must report your income to the IRS on Form W-2. This information is available to IRS collection personnel. The IRS can then place an ongoing and continuous levy on your pay until the taxes are paid. Even if you are an independent contractor, the tax laws still require your customers to report the amount of money they pay you. This is done using Form 1099-MISC. The IRS can use this information to levy your pay; however, a levy on subcontractor pay is only valid on what you are owed at the time. It is not ongoing and continuous in the same way that a levy on the wages of other employees may be.
- From information you have previously supplied to the IRS. The IRS may also have your bank account or employment history from information you provided. For example, if you have previously paid the IRS using a check, they retain the banking information you provided along with your payment. Similarly, the information you provide the IRS on prior year's tax returns can also be used in order for the IRS to impose a levy. Finally, you may have told the IRS where you bank or work while talking on the phone with someone at the Automated Collection Service. This may occur when you are contacted about a tax debt. Often, one of the first questions you will be asked is where you bank and work. This information is entered into the IRS's database.
If your bank account or wages have been levied, you need help! We are here to assist. Call us toll free at (405) 703-5689 for a no-obligation case evaluation.