IRS levied business bank account. What can be done?

I've just spent the past 2 hours on the phone with a friend of mine. he owns a small biz and the IRS levied his bank acct, taking out his bank balance of $1400. He knew he owed the money but has had financial problems and just didn't think it would happen this fast. Now, his bank said they hold the money for 21 days and that it MIGHT be possible to have the IRS remove the levy and allow him access back to the $1400. My questions are 1) Is this possible and what would he need to do to convince the IRS to allow that, 2) He still owes $3400...what kind of deal can he expect to work out? 3) Anyone have any advice for him to get back into their good graces? Will they just hard ball him tomorrow, keep the $1400 and threaten him over the remaining $3400?

Public Comments

1. Ouch!! There must be some kind of history there, already, such as letters mailed back and forth, phone calls, appointments to meet in person, and so forth. The IRS doesn't just reach out and grab a person's money without having at least offered some sort of payment arrangements. I suggest that your friend call a local IRS office and ask for an appointment with someone, to see about maybe making some kind of payment arrangement. I wouldn't hold my breath on this one, though.
2. I am an enrolled agent licensed by the Treasury Department and specialize in representing taxpayers with delinquent tax accounts. Your friend is an old story and sat on his hands much too long. You also don't mention what kind of tax is involved, employment tax withheld from others or his income tax. As business accounts go, his is pretty small. He should call IRS and try to negotiate an installment agreement in exchange for a partial release of the bank levy. If the account involves employment taxes and he is delinquent in payment of current employment tax he is going to find a very cold shoulder.
3. It will be in the best interest of your friend to borrow money from other sources and pay the money to the IRS. The interest and penalty by IRS is much more than what he can pay on borrowings from other souces (except may be credit card). Yes, he can work out installment agreement with IRS. He will be paying additional around $50 for the installment agreement. And, if he defaults, it will multiply his problems.
4. Your friend was not caught by surprise, as this action was preceded by multiple notices. He should find a way to borrow the money (from friends or relatives), mortgage his house, or sell something he owns or his business owns to pay the additional $3,400 off before other assets are seized. The interest and penalties continue to accrue if he enters into an installment agreement. The installment agreement costs $105 to set up. It is not guaranteed to be approved and may not be approved if he has failed to file or pay at any time during the past five years. He cannot expect to get the levy lifted at this point, or negotiate a smaller tax due.