Can the IRS levy my LLC bank account for personal back taxes? Single-member LLC protection question.

3 Thanks for the info, but I'm confused. If I formed an LLC specifically to separate personal and business liability, how can they just ignore that separation? Also, what if I can prove the money is earmarked for specific client projects? Wouldn't taking that money be essentially stealing from my clients?

8 The confusion comes from the difference between liability protection and tax treatment. Your LLC does protect you from business liabilities (like if someone sues your business), but for tax purposes, a single-member LLC is treated as a "disregarded entity" unless you've elected to be taxed as a corporation. Regarding client funds, the IRS generally doesn't recognize "earmarking" unless there's a formal trust arrangement. Simply having client money for future work typically doesn't create protection since those funds are considered your business income once received.

7 How long did it take to get results from them? I'm on a pretty tight timeline here with the IRS already starting collections.

19 I've heard of AI tax tools before but been burned. How do you know their advice is actually legitimate and not just generic information you could find online anyway?

12 You get preliminary results almost immediately - the AI analyzes your documents and gives you a first assessment within minutes. The detailed review with their tax professionals typically comes within 24-48 hours, which should work with your timeline since you mentioned having a few months. Their advice is definitely not generic. They identified specific provisions in my LLC operating agreement that needed strengthening and pointed out exactly which accounts were at risk based on my specific situation and the state I'm in. They base everything on actual tax court cases and IRS procedures that apply to your specific situation.

16 Wait, how does this service actually work? They somehow get you to the front of the IRS phone queue? That sounds impossible with how backed up the IRS phone lines are.

21 Yeah right. There's no way any service can magically get you through to the IRS. I've tried calling over 30 times this tax season and it's always "due to high call volume" then disconnect. This sounds like a scam.

5 It's not about getting to the "front of the queue" - they use an automated calling system that continually redials the IRS using optimal timing and navigation through the phone tree until they get a live person, then they immediately connect you. It's basically doing what you'd do manually but with technology that can keep trying when you'd give up. I was super skeptical too, which is why I included the video link so you can see exactly how it works. All they do is handle the nightmare of getting connected - once the IRS agent answers, you're having a direct conversation with them just like if you'd called yourself. The difference is you're not wasting hours of your life on hold or getting disconnected.

1 How quickly can you make that election? And would it even help me with an existing tax debt, or only for future situations?

14 The S-Corp election itself can be made relatively quickly (Form 2553), but it won't help with existing tax debt. It's more of a future protection strategy. For your current situation, you'd still need to deal with the IRS directly about the existing debt. The election creates a new tax structure going forward that can help prevent similar situations in the future by establishing a clearer separation between you and the business. But it's definitely not a quick fix for an existing IRS collection action.

18 This is actually solid advice. I was in a similar spot and worked with clients to restructure payment terms - breaking projects into smaller milestones with payments due upon completion of each phase. It protected their funds and gave me a predictable cash flow I could use to negotiate with the IRS.

This is really helpful advice, especially the CDP hearing option. I had no idea that was even available. How do you request one of these hearings? Is there a specific form or do you just call the IRS? Also, when you mention Currently Not Collectible status - what kind of documentation do they typically want to see for financial hardship? I'm worried they'll just look at my business account balance and say I have assets available, even though that money is technically for client projects.

For the CDP hearing, you'll need to file Form 12153 (Request for a Collection Due Process or Equivalent Hearing) within 30 days of receiving the Final Notice of Intent to Levy. You can submit it by mail, fax, or in person - don't rely on phone requests for something this important. Regarding CNC status, the IRS will want to see Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) along with supporting documentation like bank statements, profit/loss statements, and proof of necessary living expenses. The tricky part with your situation is that they'll definitely scrutinize business accounts. For the client funds issue, consider creating a separate trust account specifically for client deposits if your state allows it, or at minimum, maintain detailed documentation showing the flow of funds (client contracts, invoices, project timelines). While it's not foolproof protection, having clear paper trails showing funds are designated for specific client obligations can strengthen your position during negotiations. The key is getting ahead of this - once a levy is issued, your options become much more limited. I'd recommend calling the number on your most recent IRS notice to discuss installment agreement options before they escalate to levy proceedings.

This is exactly the kind of real-world advice I needed! A few follow-up questions if you don't mind: When you set up the client trust account, did you need special documentation or can any business account work as long as you label it correctly? I'm worried about the time it takes to set up new banking relationships when I'm already under pressure. Also, when you called the IRS for the installment agreement, did they ask detailed questions about your LLC assets or just focus on your personal financial situation? I'm trying to figure out how much detail to volunteer about the business accounts versus just sticking to personal income and expenses. The separate bank idea is smart - did you have any issues with clients being confused about the account change, or was it pretty straightforward to implement?

For the trust account, any business account works as long as you maintain proper documentation and don't comingle funds. Most banks can open a new business account within 24-48 hours if you have your LLC docs ready. Just call it "Client Trust Account" or "Client Deposit Account" for clarity. When I called the IRS, they focused mainly on my personal finances initially, but they did ask about business income since I'm self-employed. I kept it simple - provided my personal income/expenses and mentioned the business generates X amount monthly. They didn't dive deep into business account details during the initial call, but be prepared to provide more info if they request it. For clients, I just sent a brief email explaining I was "restructuring my business banking for better client fund protection" and provided the new account details. Most clients appreciated the transparency, and it actually made me look more professional. Only had one client ask follow-up questions. Pro tip: Open the new account at a completely different bank, not just a different account at your current bank. The IRS levy will hit all accounts at the same institution, so true separation means different banks entirely.