When a taxpayer owes money to the IRS, the agency may go after assets and property that are managed or handled by third parties. A third party may receive notice of a levy related to an employee, vendor, customer, or other third party.

A third-party level is one of the most common types of levies used by the IRS for the collection of unpaid taxes. When a third party receives notice of a levy, they must turn over, within a certain period, any property owned by the taxpayer to the IRS.

Two common examples of levies that may involve a third party are wages and bank accounts. In these situations, the third party is the taxpayer's employer or bank.

Receiving a Form 688-A doesn't mean the recipient owes back taxes or is responsible for paying any taxes. It simply means they hold another taxpayer's asset, and the IRS intends to acquire or use that asset to satisfy a tax debt.

What is Form 688-A?

There are two types of Form 688, Form 688-A and Form 688-W. Form 688-W focuses on wages and other income.

Form 688-A covers all other types of property held by a third party. Form 688-A is a last resort, and the IRS will send it out only after other efforts to contact the taxpayer or satisfy a tax debt have failed. The form will include the total amount of tax due.

For bank, credit union, or similar accounts, third parties have a 21-day waiting period before they must comply with the levy. The purpose of this delay is to give the taxpayer time to contact the IRS and arrange payment or contest the levy.

After 21 days, the bank or other financial institution must send the funds in the taxpayer's account to the IRS. A levy may freeze funds in a taxpayer's account. If a third party doesn't currently hold any funds from the taxpayer, the IRS may need to place a new levy to capture future assets.

If you have questions about Form 688-A or levies in general, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.