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Bank Levies |
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| If | And | Then |
|---|---|---|
| A bank levy for $10,000 is served. | The taxpayer has $5,000 in the bank. | The bank sends $5,000 plus interest earned during the holding period. |
| A bank levy for $10,000 is served. | The taxpayer has $25,000 in the bank. | The bank sends $10,000. No interest is sent. Only $10,000 is frozen during the holding period. |
| A bank levy for $10,000 is served. | The taxpayer has $9,999 in the bank. | The bank sends $10,000 if at least $1interest is earned on the account during the holding period. |
- The Service is the depositor.
- The money is left on deposit during the holding period.
- On the day the money is being sent, the depositor closes the account.
5.11.4.3.2
(03-30-2001)
Bank Methods Used to Avoid Paying Interest
-
Before interest was paid on levies, some banks:
- moved the levied money from the depositor's account to another account while the depositor was notified, and
- paid the depositor no interest while the money was in this "holding" account.
- Some banks have rules that they will not pay interest to depositors during holding periods for levies.
- Both of these are changing the terms of the account because of the levy. These are not grounds for avoiding interest on levy proceeds.
5.11.4.3.3
(05-05-1998)
Fees for Processing Levies
-
Many banks charge their customers a fee for processing
levies. The bank is not entitled to reduce the levy
proceeds to collect the fee.
If And Then A levy is served for $1000. The taxpayer has $1500 in the bank. The bank must send $1000 and collect its fee from the other $500. A levy is served for $1000. The taxpayer has $800 in the bank. The bank must send $800 (plus interest).
5.11.4.4
(07-26-2002)
Crediting Levy Payments
- Credit the levy payment on the date it is received.
- Credit the money in the most advantageous way to the government. Generally, apply the money to the oldest assessment, first. The taxpayer can not designate how the money is applied, because this is not a voluntary payment.
- Use
designated payment code (DPC) 05 for levy payments. Use DPC
15 for other payments caused by a levy, if they are not levy
proceeds.
Example:
A bank levy is served. When the taxpayer receives a copy, she pays the amount owed. Code this with DPC 15.
5.11.4.5
(3-30-2001)
Income Deposited in a Bank Account
- Part of taxpayer's income is exempt from levy. See 5.4. Once income is deposited in a bank, there is no exempt amount. On the other hand, unlike a levy on wages and salary, a bank levy does not continue to reach the taxpayer's money.
- When an entire paycheck is deposited, however, a hardship may exist because all of the money is levied. If this happens, release the levy in whole or in part to avoid creating hardship.
5.11.4.6
(05-05-1998)
Mortgage Escrow Accounts
- Banks generally require a portion of property taxes and insurance to be paid with each mortgage payment. This is held in escrow until the tax and insurance are paid. As long as the taxpayer can not withdraw money in these accounts, a levy can not reach it.
- Sometimes, though, the account is overpaid. The taxpayer may have the option to get this refunded. A levy can reach this.
- Also, when property is sold, there may be escrow money that will be refunded to the taxpayer. A levy can reach this, too.
5.11.4.7
(03-30-2001)
Schools' Bank Accounts
- Bank accounts may be levied to collect taxes that colleges, universities, and other schools owe. These schools' accounts may include money belonging to the Department of Education (ED). ED gives money to some schools for student aid. This is not the school's money.
- The
bank might honor the levy. If it does, process the payment.
- Call the regional ED office, and tell them about the levy. See Exhibit 5.11.4–1. Mail a copy of the levy to the regional office.
- Allow ED 60 days to look into this and certify its interest in the money. Another period can be agreed on.
- ED will send a notice of the amount and nature of its money in the account. The letter will explain how it determined this.
- Refund ED's money.
- The
bank might not honor the levy because of ED funds in the
account.
- Call the regional ED office, and tell them about the levy. Mail a copy of the levy to the regional office.
- Allow ED at least 60 days to look into this.
- Release or enforce the levy after ED certifies its interest in the account.
- A bank might not honor a levy on a school official because of ED's interest in an account. Handle this as in (3).
5.11.4.8
(03-30-2001)
Reimbursing Bank Charges Because of Erroneous Levies
-
Policy Statement P–5–39 says taxpayers will be reimbursed
for bank charges caused by erroneous levies.
- The Service must have caused the error.
- Taxpayers must not have contributed to continuing or compounding the error.
- Before the levy, taxpayers must have responded timely to contacts and given information requested to establish their position.
Example:
The taxpayer paid the amount owed, but the payment was not posted timely.
Example:
An installment agreement was made, but it was not loaded on IDRS timely.
-
Reimburse the taxpayer for fees the bank charged for
- processing the levy and
- bad check charges directly caused by the levy.
Reminder:
See IRM 3.17.10.8 for Reimbursement of Bank Charges Due to Service Loss or Misplacement of Taxpayer Checks
5.11.4.8.1
(03-30-2001)
Filing the Claim
- The claim must be filed within one year after the fees are charged.
-
The claim is filed on Form 8546.
Note:
The revision of this Form dated 2–93 is obsolete.
5.11.4.8.2
(07-26-2002)
Processing the Claim
- Approving officials are shown in Delegation Order Number 23. See IRM 1.2.2, Delegations of Authority Handbook.
-
The approving official may ask for a memo to explain
what happened. This may not be needed, though.
- The case file may be readily available.
- An employee familiar with the case can orally brief the approving official.
- The claim may be too small to warrant a memo.
- A
claim may be missing some of the required information.
Rather than just rejecting it, try to get the missing
information from the taxpayer.
Example:
Proof of the bank charges must be included with the claim.
-
Area Counsel (General Legal Services) must review all
claims and recommend:
- approval
- rejection
- compromise.
5.11.4.8.3
(07-26-2002)
After the Claim is Approved
- If the amount that the taxpayer claims is approved, send Pattern Letter 2179(P), without the INSERTs, to the taxpayer. No voucher needs to be enclosed with this letter. Send Pattern Letter 2180(P) to the Financial Management Service (FMS), and enclose one copy of Form 8546 and one copy of FMS Form 197. Form 8546 needs to be sent, so FMS has a signed agreement from the taxpayer accepting the payment as settlement for the claim. See Exhibits 5.11.4–2 and —3.
- If the claim is approved for an amount that is different from what the taxpayer claimed, send Pattern Letter 2179(P), with the INSERTs, to the taxpayer. Enclose three copies of FMS Form 197 with this letter. This FMS Form includes a place for the taxpayer to sign, accepting the amount as settlement of the claim. Send Pattern Letter 2180(P) to FMS, and enclose one copy of Form 197 with it, after the signed copies are received from the taxpayer.
- The FMS Forms are available at the web site — www.fms.treas.gov/judgefund. This site also contains instructions for following up on claims that have been sent for payment.
- If the claim will be paid by check, rather than electronic funds transfer, enter the taxpayer's address in the space on Form 197 for, "Agency/Office Mailing Address."
-
Each Form 197 sent for payment must have a unique claim
number. The number will be the first initial of the
Business Operating Division that issues the number, then
the Area Office Number, followed by the fiscal year (FY)
the claim is approved and a sequential number.
Example:
The first claim approved in SBSE Area Office 02 during FY 2003 is S-02–2003–1.
-
At the Area Director's discretion, claim numbers can be
issued by each territory. If that is done, the territory
number will be added after the Area Office Number, so
each claim will have a unique number.
Example:
The first claim approved in the Albany Territory of SBSE Area Office 02 during FY 2003 is S-02–01–2003–1.
Exhibit 5.11.4-1
(05-05-1998)
Department of Education Regional Offices
| (Reference 4.7) |
| Region I: CT, MA, ME, NH, RI, VT |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| J.W. McCormack Post Office and Courthouse |
| Rm. 502, MS 01–0070 |
| Boston, MA 02109 |
| (617) 223–9333 |
| Region II: NJ, NY, PR, VI, Panama Canal Zone |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 26 Federal Plaza |
| Rm. 3954, MS 02–1081 |
| New York, New York 10278 |
| (212) 264–4022 |
| Region III: DE, DC, MD, PA, VA, WV |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 3535 Market Street, Room 16200 |
| Philadelphia, PA 19104 |
| (215) 596–1018 |
| Region IV: AL, FL, GA, KY, MS, NC, SC, TN |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 101 Marietta Tower, Suite 2203 |
| Atlanta, GA 30323 |
| (404) 331–0556 |
| Region V: IL, IN, MI, MN, OH, WI |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 401 South State Street |
| Room 700–D, MS 05–4080 |
| Chicago, IL 60605 |
| (312) 353–0375 |
| Region VI: AR, LA, NM, OK, TX |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 1200 Main Tower, Room 2150, MS 06–5080 |
| Dallas, TX 75202 |
| (214) 767–3811 |
| Region VII: IA, KS, MO, NE |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| Northpointe Tower, 9th Floor |
| 10220 N.W. Executive Hills Boulevard |
| Kansas City, MO 64153–1367 |
| (816) 891–8055 |
| Region VIII: CO, MT, ND, SD, UT, WY |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 1244 Speer Boulevard, Suite 310, MS 08–7089 |
| Denver, CO 80204–3582 |
| (303) 844–3676 |
| Region IX: AZ, CA, HI, NV, AM. SAMOA, GUAM, TRUST TERR., WAKE IS. |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 50 United Nations Plaza |
| Room 268, MS 09–8080 |
| San Francisco, CA 98102–4987 |
| (415) 556–8382 |
| Region X: AK, ID, OR, WA |
| Regional Director/Institutional Review Branch Chief |
| Student Financial Assistance |
| Department of Education |
| 915 Second Avenue |
| Room 3388, MS 10–9081 |
| Seattle, WA 98174–1099 |
| (206) 220–7820 |
Exhibit 5.11.4-2
(02-28-2001)
Pattern Letter 2179(P)
| (Reference 4.8.3) | |
| Date of this letter: | |
| Person to Contact: | |
| Contact Telephone No.: | |
| Date: | |
| Dear [Name of Taxpayer]: | |
| We have received your claim under the Small Claims Act for $[amount] and are allowing $[amount] for reimbursement of bank charges. | |
| [Insert if the approved amount is different from what the taxpayer claimed. "Please sign and date Section B on two copies of the enclosed voucher. Then, return them in the enclosed envelope within ten days. The third copy is yours to keep." ] You should receive [Insert "a check" or "a deposit to your bank account by electronic funds transfer" ] in nine to twelve weeks. | |
| We regret our error and apologize for the inconvenience. | |
| If you have questions about this letter, please contact the person whose name and telephone number are shown above. | |
| Sincerely yours, | |
|
[Insert if Vouchers are
Enclosed "Enclosures: Vouchers Envelope" ] |
|
Exhibit 5.11.4-3
(02-28-2001)
Pattern Letter 2180(P)
| (Reference 4.8.3) | |
| Person to Contact: | |
| Contact Telephone No.: | |
| Date: | |
| Judgment Fund Group | |
| Department of the Treasury | |
| Financial Management Service | |
| Prince George's Metro Center 2 | |
| 3700 East-West Highway Mailstop 6D37 | |
| Hyattsville, MD 20782 | |
| Dear Sir or Madam: | |
| Form 197 [Insert "is" or "and Form 8546 are" ] enclosed for payment. [Name of Claimant] has signed Form [Insert "197" or "8546" ] accepting $[ ] in settlement of a $[ ] claim filed against the IRS arising from bank fees. | |
| I have approved the voucher on behalf of the IRS Commissioner under the Small Claims Act. | |
| Please process the voucher for payment. | |
| Sincerely yours, | |
| [Insert "Enclosure" or "Enclosures" ]: | |
|
Voucher [ "Form 8546" ] |
|