MAY 07, 2024

Can the IRS Take Money From Your PayPal Account?

The IRS has the legal right to take anything that you own to pay your back taxes, apart from some exclusion amounts that are pretty small.

The IRS can figure out where you bank and then send a levy notice to your bank demanding they send the IRS your money.

Here’s a redacted levy notice the IRS sent to T.D. Bank for one of our clients:

Form 8519_Issued to TD Bank
Click to enlarge.

But what about your PayPal account?

Can the IRS Take Money From Your PayPal Account? 

Yes, the IRS can take money from your PayPal account.

The IRS can levy your PayPal account in the same way that they would levy your bank account — by sending a notice to PayPal demanding that PayPal remit to the IRS the funds in your account up to the balance you owe the IRS.

Here’s a redacted levy notice the IRS sent to PayPal for one of our clients:

Redacted levy notice the IRS sent to PayPal for one of our clients.
Click to enlarge.

A lot of people think that they can hide their money in a PayPal account, or some similar kind of account, making their money not touchable or findable by the IRS; this is not possible.

What to Do If the IRS Tries to Levy Your PayPal Account

With a levy notice, the banks/financial institutions and PayPal will freeze money for 21 days in your account.

During that 21-day period you or your representative can plead your case before the IRS to explain why they shouldn’t take your funds.

There are a few approaches that can be taken:

  1. Plead hardship – Making the case to the IRS that you actually need this money to pay your basic living expenses, to put a roof over your head, to feed your family, to take care of yourself and your family. 
  2. Enter into an installment agreement – You and the IRS will enter into an agreement that the IRS will levy SOME of the money you owe now and enter into an installment plan for the rest of the owed money. 
  3. Hybrid approach – A hybrid approach would be making an initial deal with the IRS where they can take some of the money, but not all the money. The taxpayer and IRS will work on a long term game plan for the client on how to approach the case. This could include submitting an offer in compromise, which is an agreement with the IRS to sell your tax debt for less than you owe it. However, those penalties and fees can rack up the longer you owe the IRS.

Everything is relative when it comes to tax relief. It depends how much you owe, how much you make and putting negotiations together.

If you’d like more information about how the major IRS tax relief options work, check out the video below!