Can the IRS just take my money whenever they want?... even if I don't have it??

Question

I owe the IRS in taxes and went on a payment plan. However, they recently took close to $4,000 directly out of my checking account without my consent and without notifying me! It resulted in a $1,800 overdraft of my account... and I had to pay overdraft fees! The bank wouldn't even reverse those fees when I explained to them the situation. Can the IRS (and my bank) do that? Very fortunately I had scrapped enough money to cover the overdraft so I wouldn't rack up hundreds in overdraft fees. But the more I think about it, the more I confused and upset at what took place... what if I didn't have that money?? Somebody told me that I can sue the bank for their actions. Is that true? and is it worth going through the hassle?

Answer 1

You must have defaulted on your installment agreement otherwise this would not have happened.  I have several clients who have installment agreements.  The ones who make their payments never have any problems, the ones who drop the ball get levied upon.

Answer 2

The IRS can pretty much take whatever you have since you owe them.  And no you can't sue the bank over it and win.

Answer 3

Did you miss a payment? If you do then the IRS will levy your account. Close that account at once and open a new account at another bank. When you make a payment to the IRS use a money order not a check. Never get direct deposit into your account if you have a refund.

Answer 4

daoco had some good suggestions. The only problem is that, if you opened up your bank account with a SS#, the IRS has access. I have learned this since the time that I opened my last account, but my understanding is that the "signature card" that they REQUEST from you under auspices of having a signature on file to compare the future signatures on your checks against. You are actually accepting the government's presence in your bank account.

The way to open an account is to fill out a W-8BEN, which declares that you are not a US citizen.  That might sound very strange, but the definition of "United States" in the Internal Revenue Code does not include any of the 50 states.

Here is the relevant part of the code, and realize that this supposed to be a definition of the US:

(9) United States

The term “United States” when used in a geographical sense includes only the States and the District of Columbia.

(10) State

The term “State” shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.

Now, the first reaction is to say that, of course the US includes DC, etc. but realize that nowhere does it mention any state of the union. It is describing a class of entity to which DC and Guam, etc belong-- a Federal territory. The 50 states are not Federal territories.

Legislation is not achieved by merely implying jurisdiction-- it must be spelled out. That's what a definition is for, right?

If you do not live in any of the Federal Territories that make up the US as defined in the Internal Revenue Code, then you are a "nonresident alien" according to them. That doesn't mean you will be deported- that is a whole other set of laws with different definitions.

This is worth reading into. Best of luck--

Answer 5

IRS doesn't just take it, you had to not paid as you agreed.  Apparently you didn't read the terms and conditions on your installment agreement letter.

The only thing you can do now is make your monthly payment timely, IGNORING IRS IS NOT THE ANSWER. And I sure doubt you can sue the bank.

It is important to contact IRS and make arrangements to pay the tax due voluntarily. If you do not IRS may take action to secure payment.

Some of the actions we may take to collect taxes include:

Filing a Notice of Federal Tax Lien,

Serving a Notice of Levy; or

Offsetting a refund to which you are entitled.

An explanation of this process is as follows:

The federal tax lien is a claim against your property, including property that you acquire after the lien is filed. By filing a Notice of Federal Tax Lien, the government establishes its interest in your property as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate. A federal tax lien may appear on your credit report and may harm your credit rating. Once a lien is filed, the IRS generally cannot issue a "Certificate of Release of Federal Tax Lien" until the taxes, penalties, interest, and recording fees are paid in full or the IRS may no longer legally collect the tax.

A Notice of Levy is another method the IRS may use to collect taxes. Levying means that we can confiscate and sell property to satisfy a tax debt. This property could include your car, boat, or real estate. The IRS may also levy assets such as your wages, bank accounts, Social Security benefits, and retirement income. In addition, we will apply future federal tax refunds that you are due, to offset the amount you owe. Any state income tax refunds you are owed may also be applied to your liability.

You can call the IRS at 1–800–829–1040 to discuss any IRS bill you disagree with. Please have the bill and your records at hand when you call.

You have rights and protections throughout the collection process. Please refer to Publication 1, which provides additional information on Your Rights as a Taxpayer. More information on the collection process is available in Publication 594 (PDF), What You Should Know About The IRS Collection Process, and in Publication 1660 (PDF), Collection Appeals Rights. These may be obtained by accessing the IRS web site at www.irs.gov.