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Abstract: 

In light of the severe economic downturn and its continuing impact on both individual and corporate bank customers, the proper response to federal levies for unpaid taxes has become a critical issue for many financial institutions. The IRS frequently issues federal tax levies to financial institutions. Although these institutions will usually respond as required—by turning over the taxpayer’s deposits they hold—sometimes sticky issues arise. The financial institution may err in responding to the IRS that it does not hold any of the taxpayer’s money, or the institution may want to set off the money on deposit against debt it is owed by the delinquent taxpayer. What are the institution’s options? What are the penalties if levied funds are wrongly withheld from the IRS?

Keywords: tax levy; tax lien; notice and demand; 21-day holding period; right of offset; reasonable cause

Affiliations:  1: Attorney at Law.