Maine Bank Levy Process Checklist
What a Bank Levy Means
A Maine bank levy occurs when the State Tax Assessor exercises legal authority to collect unpaid state taxes directly from your financial accounts. Maine Revenue Services uses this collection method after sending required notices and allowing time for payment or response.
The levy process follows specific statutory procedures under Maine Title 36. Before the state can levy on your account, the State Tax Assessor must send you a demand letter under Section 171, which provides formal notice of the amount due and demands payment within 10 days. This demand letter must arrive by personal service or certified mail, describe levy procedures, explain alternatives, including payment plan options, and warn that failure to pay allows collection action to proceed.
How the Levy Process Works
Once you receive the Section 171 demand letter, you have 10 days to pay the amount due or contact Maine Revenue Services about alternatives. If you do not pay or respond within this period, the State Tax Assessor may proceed with levy action against your property, including bank accounts.
When the assessor issues a notice of levy to your financial institution, Maine law requires the bank to hold the funds for a specific period. Financial institutions must surrender deposits only after 21 days following receipt of the notice of levy, but not later than 30 days after receipt. During this 21-to-30-day window, the funds remain in your account but are frozen and cannot be accessed.
Property Exempt From Levy
Maine Title 36, Section 176-A specifies exact exemptions that protect certain property from levy:
● Wearing apparel and school books necessary for you or your family members are exempt from levy.
● Household goods up to $1,500 in total value are exempt if you are the head of a family, including fuel, provisions, furniture, personal effects, arms for personal use, livestock, and poultry.
● Books and tools necessary for your trade, business, or profession are exempt up to $1,000 in aggregate value.
● Unemployment compensation payments are exempt from levy, including amounts payable for dependents.
● Federal benefits are exempt, including Railroad Retirement Act annuities, Railroad Unemployment Insurance benefits, Medal of Honor special pension payments, and military retired pay annuities.
● Salary or wages needed to comply with court-ordered child support payments entered before the levy date are exempt.
● Wages are exempt subject to specific limits: 75 percent of your disposable earnings for any pay period, or an amount equal to the federal minimum hourly wage multiplied by 30, multiplied by the number of weeks in the pay period, whichever amount is less.
● Your principal residence is exempt from levy, unless the assessor makes a jeopardy determination or personally approves the levy in writing.
Payment Plan Options
Maine Revenue Services offers payment plans to taxpayers who cannot pay their full tax debt immediately. Plans up to six months typically do not require you to submit financial statements, while plans up to 24 months require completion of a Personal Financial Statement.
When you contact the department to arrange a payment plan, prepare to propose a specific monthly payment amount you can afford. The department will request a down payment, which may allow your first payment due date to fall 30 days later; without a down payment, your first payment becomes due in two weeks.
You must file future tax returns and pay taxes on time while your installment agreement remains active. State and federal tax refunds will be applied to your outstanding liability during the payment plan period. However, you must continue making regular plan payments unless a refund pays off the entire balance.
Steps to Take After Receiving a Demand Letter
- Contact Maine Revenue Services immediately: Call 207-621-4300 or 800-987-7735 for individual income tax matters, or 207-624-9595 for business tax issues to discuss your situation and available options.
- Verify the debt amount and details: Check your records to confirm the tax year, tax type, and amount claimed in the demand letter match your understanding of any unpaid obligations.
- Gather supporting documentation: Collect copies of filed tax returns, proof of any payments made toward the debt, bank statements showing your current financial situation, and any prior correspondence with the department.
- Determine your ability to pay: Calculate what you can afford to pay immediately and what monthly payment amount you can sustain if you need a payment plan.
- Request a payment plan if needed: Contact Maine Revenue Services before the 10-day deadline expires to discuss installment options and provide required financial information.
- Keep detailed records: Document dates and times of all calls, names of staff members you speak with, summaries of what was discussed, and copies of all written correspondence you send or receive.
- Follow up promptly: If you do not receive a response within a reasonable timeframe, contact the department again to request a status update and confirm your case is being processed.
Important Considerations
Maine law imposes interest at 7 percent compounded monthly on unpaid tax balances. Failure to pay the penalty accrues at 1 percent per month up to 25 percent of the tax due.
Financial institutions may offer loans with lower interest rates and no penalty accrual, providing a less expensive option than a state payment plan. You should compare total costs when evaluating different ways to resolve your tax debt.
Maine Revenue Services can collect taxes by levy within 10 years after the assessment becomes final or before the expiration of any collection period agreed upon in writing. The 10-year period pauses during any time a consensual payment plan between you and the assessor remains in effect.
Conclusion
Receiving a demand letter from Maine Revenue Services requires immediate attention and response. The 10-day deadline allows limited time to pay the amount due, arrange a payment plan, or discuss other resolution options before levy action proceeds.
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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
