Disclosure of Bank Account Information to IRS
Headliner Volume 91
July 21, 2004
The Internal Revenue Service would like
the banking community to be aware of the current laws governing
disclosure of bank account information to Internal Revenue Service
representatives upon service of a levy.
Title 26 United States Code Section 6333
of the Internal Revenue Code (IRC) authorizes the Service to examine any
books or records pertaining to property or a right to property subject
to a levy.1 The Treasury Department
interprets this section to mean that, at a minimum, the Service would be
entitled to a bank record indicating a levied account’s balance on the
date the levy was served.
When a levy is made or about to be made,
the bank should provide balance information for all accounts in which
the taxpayer has a right to property, rather than demanding that a
summons be issued. Honoring a request for information at the time the
levy is served protects taxpayer privacy rights because the rights
afforded the Internal Revenue Service pursuant to § 6333 are far less
expansive than those provided by the general summons authority of §
7602. Providing information in response to or immediately before levy
service saves both the financial institution and the IRS the time and
expense of dealing with summonses.
If the requested information is provided
at the time of levy service and the records show that the levied account
contains a minimal amount of funds, the IRS employee may decide not to
serve the levy, providing further savings to the financial institution
by avoiding the costs of contacting the customer, returning NSF checks,
and processing the levy.
Regardless of whether the bank provides
the account balance information when requested or in response to a
summons, the levy attaches to the funds in the bank account at the time
the levy is served. Upon service of a levy by an IRS employee, the bank
should immediately freeze the funds in all bank accounts containing
funds to which the taxpayer is entitled. Claims to funds not yet
processed against the accounts, such as checks, account charges or loan
payments owed to the bank, may not be honored until the taxpayer
deposits additional funds in the account or IRS releases the levy.
U.S.C. § 3401 et. seq. governs an individual’s rights to financial
privacy. Section 3402 provides exceptions to financial privacy in that
it lists instances where governmental access to financial records is
allowed. These exceptions include 12 U.S.C. § 3413. Section 3413 (c) and
(d) provide for the disclosure of financial records pursuant to title 26
of the Internal Revenue Code. 26 U.S.C. § 6333 requires the production
of books and records (account information) related to the property
subject to levy upon request by the Internal Revenue Service.