Key Takeaways:
The IRS can levy a joint bank account if one account holder owes tax debt, but only up to the portion they legally own. The agency must assess equitable interest before seizing funds.
In community property states, the IRS may claim access to the full balance of a joint account, even if only one spouse owes taxes. This is because marital assets are considered jointly owned.
Being on a joint account doesn’t protect your funds if you’re not the one who owes. The IRS can still freeze and seize your money unless you prove it’s separate property.
Non-liable spouses can challenge a joint bank account levy by filing a third-party ownership claim with documentation like pay stubs and deposit records to protect their share.
You have 21 days after a bank account is frozen to work with the IRS and potentially release or reduce the levy. Swift action is critical to protecting your funds.
The best way to prevent joint bank account levies is to avoid mixing finances when one spouse has tax debt and to resolve IRS issues early through installment agreements or Offers in Compromise.
When it comes to IRS collection efforts, few actions feel more intrusive than a bank account levy. If you share a bank account with a spouse who owes tax debt, it’s only natural to worry: Can the IRS levy a joint bank account? The answer is more complex than a simple yes or no. While the IRS does have the authority to levy certain joint accounts, several legal nuances determine how much they can take—and whether they’re even allowed to in the first place. This article explores the scope of the IRS’s power, how joint account levies work, and what your rights are if your shared finances are at risk.
Understanding IRS Levies on Bank Accounts
Before diving into how joint bank accounts are treated, it’s important to understand what an IRS levy is and how it differs from other tax enforcement tools.
What Is an IRS Levy?
An IRS levy is a legal seizure of property or funds to satisfy a tax debt. It differs from a tax lien, which is merely a claim against your property. A levy is an actual action. Money is removed from your account, wages are garnished, or assets are seized. In the case of a bank account levy, the IRS sends a notice to your financial institution demanding that available funds be frozen and sent to the government.
This levy process typically follows a series of warning letters. The IRS must first assess the tax and send a Notice and Demand for Payment. If you fail to pay or respond, you’ll eventually receive a Final Notice of Intent to Levy, usually in the form of Letter 1058 or LT11. Only after a 30-day waiting period does the IRS gain the authority to levy your bank account.
Why Would the IRS Levy a Bank Account?
The IRS typically resorts to levies when all other collection attempts have failed. If you owe taxes and ignore the IRS’s communication, they may take this more aggressive route. The agency is legally allowed to take action once it has notified you and given you the chance to appeal or resolve the issue. Bank levies are especially common when the taxpayer fails to respond to installment agreement offers, collection due process hearings, or notices of deficiency.
Can the IRS Legally Take Funds from a Joint Account?
This is the critical question for many married couples or individuals who have opened accounts together. The answer, unfortunately, is that yes, the IRS can levy a joint bank account if one of the account holders owes back taxes. However, there are key limitations and protections, especially for the non-liable party.
Joint Ownership Doesn’t Guarantee Full Protection
The most common misunderstanding is that if two people share an account, both must be responsible for the debt in order for the IRS to take funds. In truth, if one person is listed as an account holder and owes a federal tax debt, the IRS has the right to seize funds from the joint account. This is because, under federal law, the IRS is allowed to reach any assets in which the debtor has an interest.
That said, being a joint account holder doesn’t mean the IRS can automatically take 100 percent of the money in the account. The agency must first determine the taxpayer’s equitable interest in the funds. If you and your spouse each contribute equally, then the IRS may be limited to levying only half the funds. This is unless it can prove that your spouse owns a larger share.
Proportionate Ownership: How the IRS Determines What They Can Take
When a joint account is levied, the IRS makes a legal determination about how much of the account belongs to the tax debtor. This is based on the principle of equitable interest, which considers each party’s actual ownership, not just their name on the account.
For example, if a husband and wife maintain a joint bank account, but the husband is the sole income earner and his wages fund 100 percent of the account, the IRS may claim that the full balance is his. In that case, they may levy the entire amount. On the other hand, if the wife can prove she deposited a portion of the money, through pay stubs, deposit slips, or bank statements, she can contest the levy and argue that only her spouse’s portion should be seized.
This distinction becomes crucial when a non-liable party is suddenly left without access to their money. The burden of proof often falls on the innocent party to demonstrate their ownership share.
Community Property States vs. Common Law States
Another important factor in determining whether the IRS can levy a joint bank account is where you live. In community property states, such as California, Texas, Arizona, and Washington, all marital property is generally considered jointly owned, regardless of who earned the income. That means the IRS may have access to the full account balance, even if only one spouse incurred the tax debt.
By contrast, in common law states, ownership is based on individual contribution. If your name is on the account, but you did not contribute any of the funds, the IRS may not be able to legally seize your share, especially if you can prove it.
Understanding the difference between these legal doctrines is essential. Many taxpayers in community property states are surprised to learn that they are more exposed to risk, simply because of how state law classifies marital assets.
What to Do If the IRS Levies Your Joint Account
If you receive notice that your joint account has been levied due to your spouse’s tax debt, it’s important to act quickly. There is a limited window of time to challenge the action and protect your share of the funds.
Notify the Bank Immediately
When the IRS issues a bank levy, your financial institution is required to freeze the available funds in the account. They then hold those funds for 21 days before turning them over to the IRS. This holding period gives you time to negotiate with the IRS, provide documentation, or work with a tax professional to prevent the funds from being seized. Contacting your bank right away ensures that you are aware of the timeline and can prepare the necessary paperwork to challenge the levy if appropriate.
File a Claim of Ownership for Your Share
As the non-liable spouse or account holder, you can file a third-party claim with the IRS asserting your ownership of some or all of the funds. You’ll need to provide clear documentation, such as pay stubs, bank records, and deposit history, to show that your contributions are separate and should not be used to satisfy your spouse’s tax debt.
This process can be time-consuming and detailed, but it’s often the only way to recover your portion of the money. The IRS will review your claim and, if successful, may release some or all of the levied funds.
Consider Filing an Innocent Spouse or Injured Spouse Claim
In cases where the tax debt arose from a jointly filed return, you may qualify for innocent spouse relief or injured spouse status. Innocent spouse relief applies when one spouse was unaware of errors or misstatements on a joint tax return. Injured spouse status is often used when a refund is intercepted to pay the other spouse’s debt.
While these filings do not directly reverse a bank levy, they may offer long-term protection and potentially result in reimbursement or adjusted liability. These forms require careful filing and a clear understanding of IRS guidelines.
Work with a Tax Professional or Resolution Firm
Given the complexity of IRS procedures and the strict documentation requirements, working with an experienced tax professional is highly recommended. A qualified representative can help you file the correct forms, submit evidence, and negotiate a levy release on your behalf.
How to Prevent a Joint Account Levy in the Future
If you or your spouse have unresolved tax debt, taking proactive steps can help avoid future levies and financial hardship. The IRS is more lenient with taxpayers who are responsive and engaged in a resolution process.
Avoid Commingling Finances During Tax Trouble
If one spouse has known tax debt, it may be wise to avoid joint accounts altogether until the matter is resolved. Mixing funds can create legal exposure and make it harder to prove ownership if a levy occurs. Separate accounts can help preserve each individual’s financial security.
Set Up Separate Accounts
Even if you’re married, you’re not required to hold joint bank accounts. In fact, separate accounts with a clear trail of income and expenses can make it much easier to defend your property rights in the event of a levy. Just be aware that in community property states, the IRS may still consider the funds as jointly owned if they are marital assets.
Get Current on IRS Payment Plans or Offers in Compromise
The best way to avoid a bank levy is to prevent it from being issued at all. If you or your spouse owe back taxes, consider entering into an installment agreement or submitting an Offer in Compromise. These arrangements stop collection actions and give you time to pay the debt in a manageable way. The IRS generally will not levy an account if you are in good standing with an active resolution agreement.
Frequently Asked Questions
Q: Can the IRS garnish my wages if my husband owes taxes?
A: No, the IRS cannot garnish your wages for your husband’s tax debt unless you filed a joint return or live in a community property state where shared income may be at risk.
Q: Am I liable for my spouse’s tax debt?
A: You are only liable for your spouse’s tax debt if you filed jointly or live in a community property state where both spouses may share responsibility for certain tax obligations.
Q: Can funds be garnished from my account my spouse isn’t on?
A: Generally, the IRS will not garnish funds from a separate account not in your spouse’s name, unless they can prove the funds are community property or belong to the indebted spouse.
Q: What is the maximum the IRS can levy?
A: The IRS can levy up to 100% of the funds in a bank account that legally belong to the taxpayer, but only after determining their ownership share, especially in joint accounts where only one party owes taxes.
Q: What money cannot be garnished?
A: Certain income types like Social Security (if not mixed with other funds), veterans’ benefits, and some retirement payments may be exempt from garnishment unless deposited into a levy-accessible account.
Q: What is the innocent spouse rule with the IRS?
A: The innocent spouse rule allows you to avoid tax liability from your spouse’s errors or omissions on a joint tax return if you had no knowledge of the issue and meet specific IRS criteria.
Tax Help for Bank Account Levies
So, can the IRS levy a joint bank account? Yes—but only to the extent that the tax debtor has a legal ownership interest in the funds. If you share a bank account with someone who owes taxes, you are at risk of losing access to money you may have rightfully earned. However, with proper legal steps and timely action, it is often possible to protect your share. A knowledgeable and experienced tax professional can help facilitate your interaction with the IRS. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.
If You Need Tax Help, Contact Us Today for a Free Consultation
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