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Tax Lien Applied to Wrong Account
We are an S Corporation, and are listed as such with our bank. The bank paid a lien to the Department of Taxation against our former partnership from our corporate account. The name on the account and our FEIN number are different from those on the lien. Is this legal?
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 If the tax levy or attachment documents reflected the name of your former partnership and its federal employer identification number (FEIN), the bank appears to have made an error.
Check with the bank to find out if the funds have been remitted to the Department of Taxation yet. If not, ask the bank to correct its error and put the funds bank. If the funds have been remitted, see if the bank is able to reach out to the DOT to reclaim the funds. Failing that, you will have to contact the DOT yourselves to plead your case.
Banks are supposed to check carefully the taxpayer name and identification number on tax levy documents to make certain they match the information on the bank's records. Sometimes, however, when a business changes its organization from one form (partnership) to another (corporation), a bank will agree to leave an existing account in place and update the account ownership information, rather than close out the old account and open a new one. We think that, while this may avoid some costs (check replacement, for example) and hassles, it can result in confusion. We can't say for sure, but we suspect the bank may not have updated the FEIN information on its records, and therefore thought it had a match when processing the tax document in question. At least that's one scenario that could explain how your bank happened to take the funds.
Published on BankingQuestions.com 3/21/07
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