Indiana Notice of Bank Levy: What It Means and What to Do Next
Understanding the Demand for Payment
A Demand for Payment from the Indiana Department of Revenue represents a critical stage in the state's collection process for unpaid state taxes. Upon receiving this notice, you have twenty days from the mailing date to either pay the amount demanded or show reasonable cause for not paying the amount requested.
Indiana Code requires the Department of Revenue to issue this demand notice before issuing a tax warrant. Following the notice of proposed assessment, this stage precedes the tax warrant for collection of tax stage in Indiana's three-stage collection process.
Why the State Sent This Notice
The Indiana Department of Revenue issues a demand for payment after one of two specific situations under state law occurs. You may receive this notice if you filed a tax return without including the full payment of the tax owed, or if the Department of Revenue ruled on a protest and found that you owe the tax before issuing a tax warrant.
What the Demand Notice Must Include
Indiana law requires the demand for payment to contain five specific elements that inform you of your rights and the state's authority. First, the notice must tell you that you have 20 days from the date the department mails it to either pay or show reasonable cause.
Additionally, the demand notice must state the statutory authority of the Department of Revenue for issuing a tax warrant and include the earliest date on which a tax warrant may be filed and recorded. Finally, the department must inform you of the statutory authority to levy against property held by a financial institution and explain the remedies available to you to prevent the filing and recording of the judgment.
What Happens If You Do Not Respond
The Department of Revenue may issue a tax warrant if you do not pay the amount demanded or show reasonable cause within the twenty days. When the department issues a tax warrant, a collection fee equal to 10% of the unpaid tax is added to the total amount due.
Tax Warrant Filing and Judgment Process
By law, the department cannot file the warrant with the circuit court clerk of any county until at least twenty days after the date the demand notice was mailed to you. Once the circuit court clerk records the warrant, the total amount becomes a judgment against you.
Creating a lien in favor of the state, this judgment attaches to all your interest in real or personal property in the county. Appearing on credit reports and title searches, the judgment becomes a lien on your property.
Bank Levy Authority and Process
After a tax warrant becomes a judgment, the Department of Revenue gains authority to levy upon property you hold at a financial institution. The department may send a claim to the financial institution under Indiana Code Section 6-8.1-8-8. Upon receipt of the department’s notice of levy, the financial institution must place a sixty-day hold on or restriction on the withdrawal of funds you have on deposit.
How Financial Institutions Handle Levies
When your property exceeds the amount owed to the state, the financial institution surrenders your property to the department in an amount equal to the amount owed. Once the department's notice of levy reaches the bank, the 60-day hold period does not serve as a warning to you.
Collection Timeline and Stages
Indiana follows a clearly documented collection process with defined timeframes for each stage.
Internal Collections may attempt to collect the warrant for up to 30 days after it is filed with the clerk. The warrant then moves to your local county sheriff for a term of one hundred twenty days, or up to a maximum of three hundred sixty-five days if an agent payment plan is established.
If the warrant remains unsatisfied upon return from the sheriff's office, it is transferred to the contracted outside collection agency. The Indiana Department of Revenue currently contracts with United Collection Bureau, Inc. for outside collection agency services.
Steps to Take After Receiving This Notice
Contact the Indiana Department of Revenue immediately using the contact information listed on the notice and request clarification of what the debt represents. Gather all tax records for the year or period mentioned in the notice, including your original tax return, any amended returns you filed, pay stubs showing tax withholding, and records of estimated tax payments you made.
Disputing the Demand Notice
If you believe the demand notice is incorrect, send a written response to the address listed on the notice. Include the notice number and date in your letter, clearly explain why you believe the debt is wrong, and attach copies of supporting documents such as proof of payment or your tax return for that year.
Payment Plan and Settlement Options
You may request a payment plan if you recognize the debt but cannot pay the full amount immediately. Contact the Department of Revenue directly to ask about available payment plan options. In some situations, the department offers extended payment options of over ninety days. Paying one-third of the total amount due within two weeks. In some situations, the department offers extended payment options of over ninety days. The two-day response period provides a new notice with a new twenty-day due date. Paying one-half of that second notice within the twenty-day response period provides another new notice to pay the balance in full.
What This Notice Does Not Mean
Receiving a demand for payment does not mean you have lost all legal rights or that you cannot dispute the debt. The demand notice does not give you the right to dispute the underlying tax liability at this stage, so if you wish to dispute the tax liability shown on the demand notice for payment, you must pay the amount owed before the twenty-day period expires and request a refund for the disputed amount.
Documenting Your Actions
Create a file containing a copy of the demand for payment and all accompanying documents, such as envelopes or letters. Keep copies of all documents you gather related to the debt, copies of all letters you send to the state, and a written record of every phone call you make.
Document any responses the state sends to you and keep bank statements showing the account in question. This documentation becomes essential if the situation escalates or if you need to provide evidence of your actions to resolve the debt.
Received a State Tax Notice?
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance
