Can the IRS levy my single member LLC bank account for my personal tax debt?

This is a really important distinction to understand. When you have a single-member LLC that hasn't elected to be taxed as a corporation, it's considered a "disregarded entity" for federal tax purposes. This means the IRS essentially sees your LLC and you as the same taxpayer. So yes, unfortunately, the IRS can absolutely levy your single-member LLC bank account for your personal tax debts. The "corporate veil" that normally protects business assets doesn't apply for federal tax collection when it's a disregarded entity. From the IRS perspective, that business account is just another one of your personal accounts. The fact that some of the money belongs to clients doesn't automatically protect it either. The IRS generally doesn't distinguish between your funds and client funds if they're mixed in your account.

I was in a similar situation last year with about $55k in back taxes and a single-member LLC. After weeks of stress and getting nowhere with the IRS, I found this tool called taxr.ai (https://taxr.ai) that really helped me understand my options with the IRS collections process. They analyzed my situation and showed me exactly what documentation I needed to prevent the IRS from taking my business funds. Basically they helped me understand how to document that certain funds were actually held in trust for clients and shouldn't be subject to levy. They even helped me draft a letter to the IRS explaining the situation. The best part was they reviewed my financial statements and showed me how to properly separate client funds from my operating expenses, which I wasn't doing correctly before. Definitely check them out if you're freaking out like I was.

Just wanted to update - I tried taxr.ai after seeing this thread and it was honestly a game-changer. I uploaded my IRS notices and within hours I had a complete breakdown of my options. They identified that I qualified for Currently Not Collectible status, which I had no idea about. They guided me through exactly what documentation I needed and how to properly segregate my business funds to protect client money. They even gave me specific language to use when communicating with the IRS. I was able to set up a proper client trust account based on their guidance and get documentation in place before the IRS could levy anything. Now I'm working through a manageable resolution plan. Definitely worth checking out if you're in a similar situation.

If you need to actually talk to someone at the IRS about your situation (which you probably should), good luck getting through. I spent THREE WEEKS trying to reach someone about my levy situation. Kept getting disconnected or waiting for hours. Finally I used this service called Claimyr (https://claimyr.com) that got me through to an actual human at the IRS in less than 20 minutes. They have a demo video here: https://youtu.be/_kiP6q8DX5c that explains how it works. Basically they hold your place in line with the IRS and call you when they're about to connect you. Since I was dealing with a levy threat, I needed to speak to someone ASAP, and this was the only way I could actually get through. Once I finally talked to someone, I was able to get a 60-day hold put on collections while I sorted out my documentation.

I need to apologize and eat my words. After my skeptical comment, I was still getting nowhere with the IRS after two more days of calling, so I broke down and tried Claimyr. Got connected to an IRS revenue officer in 35 minutes (after spending literally DAYS trying on my own). The agent actually helped me set up a temporary hold on collections while I provided documentation about my LLC's finances. I managed to get a 45-day hold on any levies which gives me time to properly document which funds in my business account are client funds held in trust versus my operating income. That breathing room is absolutely priceless when you're worried about your accounts being emptied. Sorry for being a doubter. When you're dealing with the stress of potential levies, actually talking to a human at the IRS makes all the difference.

Former tax resolution specialist here. Beyond the levies, you should quickly look into a proper installment agreement once you're more liquid. A few tips: 1) Consider converting your LLC to an S-Corp election if you haven't already. It won't help with your current debt, but it creates better separation for future tax situations. 2) For your immediate needs, document EVERYTHING about client funds. Get written agreements showing the money is held in trust if possible. 3) Consider opening a separate, designated client trust account ASAP and moving those funds there with proper documentation.

Just be careful not to do anything that could be considered tax evasion or fraudulent transfer. Moving money around specifically to avoid IRS collection after you've received notices can potentially be seen as trying to evade payment. If the money truly belongs to clients, make sure you have proper documentation showing that. The timing looks suspicious if you suddenly create new accounts and move money right after getting collection notices.

I went through something very similar with my single-member LLC last year. The key thing that saved me was immediately opening a properly designated IOLTA (Interest on Lawyers' Trust Account) style trust account specifically for client funds, even though I'm not a lawyer. Many banks will set up similar trust accounts for other professionals. The critical part is having ironclad documentation showing these are client funds held in trust, not your operating income. I had to provide retainer agreements, invoices showing the funds were for future services, and a clear paper trail separating client deposits from my earned income. Also, don't wait until you're more liquid to contact the IRS. Call them now and explain your situation - they're actually more willing to work with you if you're proactive rather than reactive. I was able to get a Currently Not Collectible status temporarily while I sorted out my finances, which stopped all collection activity. The IRS revenue officer I spoke with told me that being upfront about the client funds situation and showing proper documentation was much better than them discovering it during a levy. They appreciate transparency and it can actually work in your favor during negotiations.

This is exactly the kind of situation where you need to act fast but also be very careful about how you handle it. As others have mentioned, the IRS absolutely can levy your single-member LLC account for personal tax debt since it's a disregarded entity. Here's what I'd recommend doing immediately: 1) **Document everything** - Get written proof that certain funds belong to clients. This means retainer agreements, invoices showing advance payments, anything that proves the money isn't yours. 2) **Contact the IRS proactively** - Don't wait for them to levy. Call and explain you have client funds mixed in the account that need protection. They're more likely to work with you if you're upfront. 3) **Set up proper separation** - Open a designated trust account for client funds if you haven't already. But be careful about the timing - moving money after receiving collection notices can look suspicious. The $78k debt is substantial, but the IRS has options like installment agreements and Currently Not Collectible status if you truly can't pay right now. The key is being proactive and transparent rather than trying to hide assets. Also, for future reference, consider electing S-Corp status for your LLC to create better separation between personal and business tax liabilities, though that won't help with your current situation. Don't panic, but don't delay either. The sooner you address this head-on, the more options you'll have.