IRS Bank Levy Guide and Links to Resources

Q: What is a Bank Account Levy? How it Works, What to Expect

An IRS bank account levy allows the government to take funds from your bank account to pay off your tax liability. The IRS will send you a notice of intent to levy your bank account. Then, the agency will send a notice to your bank informing them of the levy and specifying how much money needs to be withdrawn from your account. Once the funds are withdrawn, you will have 20 days to request a hearing with the IRS to explain why the levy should be released. If you do not request a hearing or if the IRS does not release the levy, the money will be used to pay off your tax liability. In some cases, the IRS may also garnish your wages in order to satisfy your tax amount owed. However, an IRS bank account levy is one of the most common methods of collecting on unpaid taxes.

bank levy irs guidance

An IRS bank account levy is when the IRS seizes funds directly from your bank account to cover back taxes you owe.

Before contacting your bank, the IRS must send you a notice giving you 30 days to appeal. If you don't respond, the IRS will contact your bank, and your bank will freeze the money in your account (up to your balance owed) for 21 days. During that time, you must establish financial hardship or show that the levy was done incorrectly. Otherwise, your bank will send the money to the IRS.

An IRS bank levy will only impact the current funds in the account. In fact, once your bank activates the bank levy, it will not affect any future deposits. The IRS can issue another bank levy later. However, this rarely happens.

Usually, this is the last line of defense for the Internal Revenue Service. The IRS only uses this enforcement collection method after trying to contact you several times without getting a response. To understand more about bank levies and how to stop them, explore the information in the links below.

What is a Bank Account Levy? How it Works, What to Expect

A bank levy is when the IRS seizes the money in your bank account. Here's a brief overview of what to expect, or check out the link above for a more detailed look at the process:

Tax assessment - You get into tax debt by filing a tax return and not paying, by failing an audit that leads to a tax liability, or by having the IRS assess tax against you when you don't file a return.
Demand for payment - The IRS sends several notices demanding payment and threatening to take your future tax refunds and your assets.
Final notice of intent to levy - The IRS sends a final levy notice that informs you of your right to a hearing. If you don't request a hearing or set up payments within 30 days, the agency moves forward with the levy.
Form 668–A - The IRS sends this levy form to your bank, and by law, your bank must immediately freeze the funds in your account up to the amount owed. The IRS also has the legal right to find out the balance in your account.
21 days - Your funds will stay frozen for 21 days. Your bank will only unfreeze the funds if you contact the IRS and prove financial hardship or that the levy was done in error. At the end of this period, your bank will send the money to the IRS.
Additional collections - If the bank levy does not cover your full tax liability, the IRS may engage in other collection actions such as wage garnishment or property seizure.

How to Stop or Release a Bank Account Levy

If the IRS has frozen the funds in your bank account, there are only a few select ways to stop the levy. Here is a brief overview or check out the link above for a more detailed look at how to release a bank levy:

Prove immediate financial hardship - If you show that the bank levy causes immediate financial hardship, the IRS will tell your bank to unfreeze the funds. Generally, this means not being able to afford your housing or utility expenses, but the IRS doesn't back down easily so you may want to work with a tax professional.
Establish that the levy affects exempt funds - The IRS isn't allowed to take certain types of payments including certain pension payments, disability payments, and unemployment. If the levy is affecting funds you have received in this manner, the IRS must release it.
Find an error in the bank levy process - If the IRS didn't follow the correct guidelines for notifying you or if they missed other procedural rules, they must release the levy on your account.
Pay the tax in full - If you pay the tax in full in another way--for example with a credit card--the IRS will release the levy.

Although getting a levy released can be difficult, if you act when you receive the Final Notice of Intent to Levy, you can easily avoid a bank levy by setting up an installment agreement or qualifying for another type of IRS payment option.

Bank Levy Frequently Asked Questions (FAQs)

The link above features answers to commonly asked questions about IRS bank account levies. Here are the top five questions people have:

What is a bank levy? When the IRS seizes the funds in your bank account.
Why is my bank account frozen? If the money in your account is frozen, the IRS may have told your bank to levy the funds for unpaid taxes.
How do you stop a bank levy? After the funds have been frozen, you can usually only stop a levy if there is an error or you're suffering financial hardship.
Can I get the money back? You can request a refund of seized money and property, but that's unlikely to work except in extreme circumstances.
Who should I call about a bank levy? Contact the IRS directly or reach out to a tax pro for expert-level help and guidance.

Get Professional Bank Levy Help

Worried about an IRS bank levy? You can find a licensed tax professional who specifically has experience in resolving IRS bank levies here. If you act quickly, they can stop the levy before the IRS seizes your money. If your account is already frozen, they can help you explore options and understand what comes next. Use TaxCure to search for a tax pro who has dedicated experience with bank levies. To learn more about how a tax pro can help, check out the link above.