A bank lien is a legal action that allows creditors to withdraw funds from your bank account. Your bank freezes the funds in your account and the bank must send that money to creditors to pay off your debt. A garnishment on a bank account allows a creditor to legally withdraw funds from your bank account. When a bank receives notification of this legal action, it will freeze your account and send the appropriate funds to your creditor.
In turn, your creditor uses the funds to pay off the debt you owe. When the rate is in a bank account, the Internal Revenue Code (IRC) establishes a 21-day waiting period to meet the rate. The waiting period is intended to give you time to contact the IRS and agree to pay the tax or notify the IRS of errors in the rate. An IRS bank account garnishment is when the IRS seizes funds directly from your bank account to cover the back taxes you owe.
Usually, the IRS contacts your bank to let you know about taxes. Your bank must then freeze your assets for 21 days from the day you receive the IRS notification. Consequently, if you don't take action during that time, the bank sends all funds to the IRS. Bank liens are a tool used to empower creditors when you fall behind on your payments.
The bank garnishment is established by the creditor who files a legal document with the court. This allows them to withdraw money directly from your bank account to pay off a debt you owe. A bank lien is legal action taken by private creditors, the federal government, and other lenders and creditors. A bank lien freezes the funds in your personal bank account and allows creditors to take funds to pay off your debt.
A bank lien is a tool that creditors can use to recover the funds owed to them. Lenders often find other ways to raise money before resorting to filing lawsuits. When you're subject to a garnishment on an IRS bank account, the first thing you should do is try to stop the process as quickly as possible. If you can “exempt” the funds your bank raised, the creditor could be forced to return the money.
If the tax isn't in effect yet, this is also a good time to review how much money is in your bank account. The agency will then send a notice to your bank informing you of the garnishment and specifying how much money should be withdrawn from your account. If you can successfully challenge the bank account garnishment with the IRS, you may be able to request that your funds be withheld and avoid any other penalties for late payment. The debt collection process can be time consuming and expensive, so lenders may prefer to work with you instead of cashing your bank account.
If a creditor has raised your funds, it's important to understand that you may be able to get your money back. A bank lien can cause a debt cycle that is difficult to recover from and can damage your credit in the long term. If you can't file for bankruptcy and the judgment can't be overturned, you won't be able to keep the funds in your bank account. Ultimately, understanding how stopping a garnishment on an IRS bank account can help ensure that you can protect your financial interests in the future.
You may be reimbursed for bank charges caused by erroneous taxes by submitting Form 8546, Request for Reimbursement of Bank Fees (PDF), to the IRS address on your copy of the fee. Once the creditor is approved to seize a bank account, they must hand over the judgment to their bank. At this time, you have an additional 21 days to resolve the situation; otherwise, the bank will remit the funds to the IRS on the 22nd. If the debt isn't yours or the amount claimed is incorrect, you could file a lawsuit or stop a bank garnishment.