Internal Revenue Code IRC 6332(c), Surrender of property subject to levy provides special rules when a levy is served on money in banks, credit unions, savings and loans, and similar institutions. This IRM provides guidance on these special rules.

On January 13, 2011, the Deputy Commissioner for Services and Enforcement amended Policy Statement 5-39, Reimbursement of Bank Charges Due to Erroneous Levy and Service Loss or Misplacement of Taxpayer Checks, or Direct Debit Installment Agreement Processing Errors. The amendment to Policy Statement 5-39 (P-5-39) added claims for reimbursement of bank charges incurred due to IRS processing errors on Direct Debit Installment Agreements (DDIA). See IRM 1.2.14.1.11, Policy Statement 5-39 (Rev. 1). The Commissioner revised Delegation Order (DO) 1-4 (Rev. 1) to allow first level managers in IRS Operating Divisions to consider, ascertain, adjust and determine under 31 USC § 3723 claims for reimbursement of bank charges arising out of DDIA processing errors. See IRM 1.2.40.5.

IRC 408(n) - Bank

IRC 6323 - Validity and priority against certain persons.

IRC 6331 - Levy and distraint.

IRC 6332 - Surrender of property subject to levy.

IRC 6333 - Production of books.

Treasury Regulations § 301.6332–1 - Surrender of property subject to levy.

Treasury Regulations § 301.6332–3 - The 21-day holding period applicable to property held by banks.

IRM 1.2.14.1.11, Policy Statement 5-39 (Rev. 1), Reimbursement of Bank Charges Due to Erroneous Levy and Service Loss or Misplacement of Taxpayer Checks, or Direct Debit Installment Agreement Processing Errors.

IRM 1.2.40.5, Delegation Order 1-4 (Rev. 1) (formerly DO-23, Rev. 15), Settlement of Tort Claims, Claims under the Small Claims Act, and Claims Made by an Employee of the Internal Revenue Service for Damage to or Loss of Personal Property Incident to Service.

The Director, Collection Policy is responsible for all policies within the levy program.

The National Program Manager, Enforcement is responsible for development and delivery of policies within the levy program.

Managers of employees who issue levies are responsible for ensuring these procedures are followed and employee actions are timely and accurate.

Revenue officers and collection advisors are responsible for following the procedures in this IRM.

Integrated Collection System (ICS) is used by field revenue officers as a method for generating levy documents that are issued to third party levy sources.

The Collection Activity Reports (CAR) report number 5000–24 records the total number of levies issued. Total Levies are the sum of Field, SB/SE ACS and W & I ACS (monthly and cumulative). The data sources are the ACS Customer Service Activity Reports (CSAR) - Monthly Support Site Report (ACS Levies) and ICS (Field Levies). See IRM 5.2.4.11, Levy and Seizure Report (Report Symbol NO-5000-24). The IRS has determined that levy data may be made available as national statistics, provided that such data will never be used to evaluate any employee or to suggest or impose production quotas or goals. See IRM 1.5.2, Managing Statistics in a Balanced Measurement System, Uses of Section 1204 Statistics.

Levy program numbers are published yearly in the IRS Data Book, Enforcement: Collections, Penalties & Criminal Investigation, in Table 16 at https://www.irs.gov/uac/enforcement-collections-penalties-criminal-investigation.

Targeted program reviews are periodically performed by Collection Policy to determine whether IRM guidance requires clarification or revision.

Management will ensure program effectiveness through managers' case reviews, operational reviews conducted by the territory, Area, and Field Collection Director, and NQRS reviews.

National Quality Review System (NQRS), attribute 417, Managerial Approvals for Enforcement provides independent collection review information from which management may draw inferences regarding overall case quality for this attribute. See IRM 5.13.1, Embedded Quality Administrative Guidelines.

Embedded Quality Review System (EQRS), Collection managers use EQRS, attribute 416, Appropriate Enforcement Tools, and attribute 607, Taxpayer Rights to complete all case reviews for revenue officers.

Reimbursement of Bank Charges Due to Erroneous Levy must be approved by managers. See IRM 1.2.40.5, Delegation Order 1-4 (Rev. 1) (formerly DO-23, Rev. 15) for Claims under the Small Claims Act.

Programming safeguards are built into the ICS system to prevent a levy from being generated on a module where the required notices have not been issued. The ICS system also has controls to reflect the status of the levy, i.e, open, closed etc.

Terms and acronyms associated with the field levy program include:

See Exhibit 5.11.4-2 for list of Acronyms.

The ICS User Guide, Chapter 10 - Levy details all the functions necessary to maintain levy sources, issue levies and final demands, and close or release levies. See http://icsweb.web.irs.gov/Docs/HTML/user_guide.htm.

The National Levy Source Look-Up web page provides up-to-date levy source name and address information. See https://acsweb.enterprise.irs.gov/nlsweb/pages/nl08.xhtml.

The MySB/SE, Enforcement web page provides access to various information and job aids related to the levy program. Seehttp://mysbse.web.irs.gov/Collection/toolsprocesses/Enforcement/default.aspx.

The Taxpayer Bill of Rights (TBOR) links to listing of those rights that already existed in the tax code, putting them in simple language and grouping them into 10 broad categories. See https://www.irs.gov/taxpayer-bill-of-rights. For additional information see IRM 1.2.10.37, Policy Statement 1-236.

Below are recommended resources, which can be used to address questions on levy guidance.

The bank must turn over the interest earned on the account(s) during the holding period using the same method for figuring the interest it normally would. Even so, the amount surrendered is no more than the amount shown on the levy.

The date the bank normally credits interest to accounts does not matter. If interest is earned, it must be paid over as shown in (1).

To compute the interest, the bank treats the Service as though:

Before interest was paid on levies, some banks:

Some banks have rules that they will not pay interest to depositors during holding periods for levies.

Both of these methods may result in a change to the terms of the account and not treating the Service as the depositor because of the levy. These are not grounds to avoid paying interest on levy proceeds.

Many banks charge their customers a fee for processing levies. The bank is not entitled to reduce the levy proceeds to collect the fee.

Letter 4030(CG), Letter to Bank to Remit Service Charge, is available for use when you learn that the levy proceeds have been reduced by a processing fee. The letter informs the financial institution that a charge against levy proceeds is contrary to the provisions of the Internal Revenue Code and failure to remit an amount equal to the service charge may result in the Service filing a suit for failure to honor a levy.

The claim must be filed within one year after the fees are charged and is limited to $1,000.

The claim is filed on Form 8546, Claim for Reimbursement of Bank Charges.

Approving officials are shown in IRM 1.2.40.5, Delegation Order Number 1–4 (Rev. 1) (formerly DO-23, Rev. 15). Authority is delegated to Compliance Territory Managers and Compliance Technical Support Managers (second level).

The approving official may ask for a memorandum to explain what happened. This may not be needed if:

A claim may be missing some of the required information. Rather than just rejecting it, try to get the missing information from the taxpayer.

If the claim does not meet all of the criteria in IRM 5.11.4.9, send a brief disallowance letter to the taxpayer indicating the reason for the disallowance.

If the amount that the taxpayer claims is approved, send Letter 2180, Claim for Bank Charge - Amount Requested Approved to the Beckley Finance Center (BFC), and enclose Form 8546, Claim for Reimbursement of Bank Charges, and Bureau of the Fiscal Services, Fiscal Service (FS) Form 197. Form 8546 needs to be sent so BFC has a signed agreement from the taxpayer accepting the payment as settlement for the claim.

If the claim is approved for an amount that is different from what the taxpayer claimed, send Letter 2179, Claim for Bank Charge - Approved Amount Different to the taxpayer. Enclose three copies of FS Form 197 with the letter. The Fiscal Service form includes a place for the taxpayer to sign accepting the amount as settlement of the claim. After the signed copies are received from the taxpayer, send Letter 2180 to BFC, and enclose the FS Forms 197.

The FS forms are available at the web site https://www.fiscal.treasury.gov/fsservices/gov/pmt/jdgFund/forms.htm or IRM 3.17.10-15, FS Form 197, Judgment Fund Voucher for Payment.

If the claim will be paid by check, rather than electronic funds transfer (EFT), enter the taxpayer's address in the space on FS Form 197 for, "Agency/Office Mailing Address."

Each FS Form 197 will be sent for payment on a Form 3210, Document Transmittal, and 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.

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.

The instructions on Form 668-A(c)(DO), Notice of Levy, require the recipient to:

"Make a reasonable effort to identify all property and rights to property belonging to this person. At a minimum, search your records using the taxpayer’s name, address, and identifying number(s) shown on this form."

The instructions do not require a perfect match of all information. In the event there is a question regarding what the levy attaches, the bank should contact the revenue officer or IRS employee whose name appears on the levy.

In some cases, it may be reasonable for the depository to identify an account based on a single matching identifier. In other cases, it may be appropriate for the depository to corroborate one matching identifier by matching one or more additional identifiers. In the following examples, it would be reasonable for the depository to call the contact number on the levy for guidance.

Consult with your manager, collection advisors, and/or area counsel if the taxpayer’s property or right to property in the bank account is in question. After consulting with your GM to determine the appropriate action, review IRM 5.11.2.2.9 , Refusing to Comply with a Levy, for guidance.