I have previously written about FL Department of Revenue (FDOR) bank freezes. While they routinely happen in earnest to start they year, they generally will continue until mid November. There is no convenient time for this to happen to any business. I am seeing the FDOR continuing to use bank freezes frequently and more quickly in the collection process. It is important to know about a bank freeze and how to resolve it as it creates significant problems for you or your client's business. This article describes how bank freezes happen and how to respond to a freeze when it happens.
When a business has unfiled or unpaid sales tax returns , the FDOR will initiate collection activities. While a criminal case could begin, this article will only discuss collection activity involving bank freezes. With "non criminal" enforcement activity by collectors, the FDOR collector will contact the business to discuss the account issues. Most commonly, once the liability is ultimately identified, the business enters into a payment plan to resolve the liability. if there are no problems with the payment plan, then the liability is cleared, the account issues resolved, and the lien satisfied in the public record. However, where thee is a problem with the payment plan and the taxpayer defaults, the liability is then subject to further enforcement activity. Assuming a subsequent payment plan is not agreed upon, the Department will freeze the taxpayer's bank account to "expedite" a resolution. Lately, I am seeing the FDOR resort to bank freezes even without other contact or efforts to initiate a payment plan. This is a very scary trend.
Similarly, should the business or its representative not respond to the FDOR collector - either after a stip agreement default or in response to initial communications before arranging a stip agreement - the Department will freeze the taxpayer’s bank account to "encourage" a response by the taxpayer or its representative to resolve the account issues and liability. The bank freeze will occur without warning or notice and the business will simply see a negative account balance. There could be a note on the account indicating a "legal order" referencing the FDOR's bank freeze. The bank might not note this on the account but send a notice to the account holder about the legal order. If the bank sends this notice, then the notice could indicate the amount being sought by the FDOR. Many times, the balance is not noted and the taxpayer has to "estimate" this amount based on the negative balance relative to the funds in the account at the time of the freeze.
When the bank initiates the bank freeze, the amount allegedly owed to the Department is removed from the amount available to the account holder - whether or not the full freeze amount is in the account at that time. It usually isn't which result in the negative available balance shown on the account. While the taxpayer does not have access to remove funds from the account below the freeze amount, funds can still go into the account. Any funds going into to the account will be subject to the freeze until that amount exceeds the freeze total. This means credit card sales will continue to be deposited into the account but the taxpayer will not be able to pay employees or vendors (or anyone else including landlords). Generally, there are payments in process that the bank will not honor which results in fees charged to the frozen account holder. Nothing jeopardizes a business more quickly than the loss of staff and/or available product for sale. This means there is extreme urgency for resolving the initiated bank freeze.
The FDOR freezes taxpayer accounts because it provides significant leverage in resolving the situation. The bank is required to update the Department on the amount frozen in the taxpayer’s account(s). Any account with the businesses name and FEIN on it will be frozen. It will not matter if other business or individual names are on the account. Also, the freeze amount will separately apply to each account frozen. I have seen instances where significantly more money than allegedly owed was frozen by the Department when multiple accounts were frozen. With this leverage, the FDOR could "apparently" move slowly in addressing the situation. It knows that the frozen account will only increase the balance held. And, the FDOR will commonly wait for updated amounts frozen before working to finalize a payment plan that will release the account based on the terms of the stipulated payment agreement. The Department typically issues a Notice of Intent to Levy (NOITL) around seven days after an account is frozen. That is a separate issues that needs immediate attention as protest rights require a filing within 21 days after receipt of the NOITL. This article will not address protesting the NOITL.
To resolve the bank freeze, the taxpayer needs to quickly start working to resolve the situation. Identifying all account issues is the first step. The quickest situation would involve all filed but unpaid returns. This means nothing else has to be filed and the payment plan "simply" has to be agreed upon. However, if there are any unfiled returns - and this would not be limited to only sales tax returns - then all returns need to be filed and processed for the account liabilities to be established with certainty. This is problematic as returns outside one year that cannot be e-filed through a taxpayer's online account will require manual processing by the FDOR. With the FDOR's staffing shortages, this will require at least one week from the date of submitting the returns to the FDOR. I have seen returns take several weeks to process based on the number of "paper" returns that need to be processed.
When all returns are filed, then the Department will need financial information. The FDOR collector will issue a ZT20 Request for Financial Information. It makes sense to get this document as early as possible in the process. The ZT20 will request the last two federal returns, financial statements, last six months' bank statements and a proposed payment plan to resolve the account liability. If there are multiple tax liabilities, the Department could request that one of the tax types by fully cleared up so that only one stip agreement is established. However, there is the availability of having a separate stip agreement for each tax type. This is not preferred by the Department.
When all returns are filed and processed and the ZT20 information is provided, then the Department will revie the provided financial information and the taxpayer's proposal to respond to the offered terms. The taxpayer should expect the Department to counteroffer seeking more down payment or larger monthly payments - especially if the proposal is not 25% of the liability as a down payment with the balance fully paid of 11 monthly installments. This generally is the Department's "default" plan preference if not less depending on the amount owed and what the financial information indicates. And, the Department will review bank statement activity to identify expenses it feels can be eliminated to increase the taxpayer's ability to make larger monthly payments. More problematic, the Department recently has sought to take all of the frozen funds - regardless of what it might help. This is a huge problem as freezes routinely occur on Thursday of a week which means impending wage payments are sought by the Department - as well as collected sales tax due for the next sales tax return. These are just some of the issues to deal with to get a payment plan in place so that a release is sent to the bank's legal department to send the down payment to the FDOR and release the account so the taxpayer can access any remaining funds again.
As is clear, resolving bank freezes quickly is imperative for a business to stay open. This is separate from avoiding bank charges and fees related to the FDOR's freeze and any returned items that occur during the duration of the bank freeze. If, or when, this happens you or your client need to move quickly to get information and properly respond to the freeze to resolve it as quickly as possible. You can contact us for a free initial consultation regarding bank freezes or collection activity that precedes a bank freeze - routinely there isn't a lot of time between initial collector contact and the notice of freeze being sent to bank's legal departments (the FDOR uses a "shotgun" approach and sends the notice out to multiple banks to make sure it freezes as many accounts as possible for the delinquent taxpayer). When a business has account issues with the FDOR, it is never too early to try and resolve the situation. Waiting will only make it worse - and more expensive.
About the author: Mr. Parker is a partner in the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice concentrates on sales and use tax and includes criminal defense of sales tax cases and state tax audits/controversies proceeding from audit through administrative litigation involving sales and use tax and all other state taxes including reemployment tax, communication service tax, and cigarette & tobacco tax. Mr. Parker also handles matters involving the Department of Business and Personal Regulation and Office of Financial Regulation and the industries they oversee. Mr. Parker received his accounting degree, law degree, and L.L.M. in Taxation from the University of Florida. You can learn more about Matthew with firm bio.
About the law firm: At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
Additional resources
Increased FDOR Collections, Investigation & Audit Activity with the New Year, published February 9, 2025, by Matthe Parker, Esq.
Don't Hire an IRS Attorney for Sales Tax Problems!, published July 17, 2024, by James Sutton, CPA, Esq.
FL Sales Tax Collections: Notice of Warrant Filing and Ensuing Activity, published July 8, 2024, by Matthew Parker, Esq.
FL DOR Sales Tax Criminal Investigations - What You Need to Know, published July 1, 2023, by Matthew Parker, Esq.
Florida Sales Tax Audit Help, published January 8, 2025, by James Sutton, CPA, Esq.