What Is an IRS Bank Account Levy? How It Works & What to Expect
An IRS bank levy is one of the most powerful enforcement tools the government has to collect unpaid tax debts. When the IRS levies your bank account, the agency legally orders your bank to freeze the money in your account and send those funds to the IRS after a waiting period. This often comes as a shock, especially for taxpayers who were unsure how the collection process worked or who never realized how close they were to enforced collection.
A levy typically happens only after months of ignored notices, but once it’s in motion, the consequences are immediate and serious. Below is a clear look at what a bank levy is, the legal timeline, what actually gets frozen, how to get a levy released, and—most importantly—how to avoid a bank levy in the first place.
Key Takeaways
- Yes, the IRS can freeze your bank account. The IRS can order your bank to hold the money in your account if you don’t pay your taxes.
- You normally receive a 30-day warning. The IRS must issue a Final Notice of Intent to Levy before it can levy your bank account.
- Your bank must freeze the funds for 21 days. This gives you one last chance to resolve your tax liability.
- Funds are seized on day 22 unless you take action to stop the levy.
- Hardship relief is available. The IRS must release a levy if it creates immediate financial hardship.
- Once taken, funds are difficult to recover. Refunds of levied money are only granted in narrow situations.
- Avoiding the levy is far easier than removing it. Taking action after receiving an Intent to Levy notice is the best way to protect your money.
What Is a Bank Levy From the IRS?
A bank levy is the legal process the IRS uses to take money directly from your bank account to satisfy unpaid tax debts. Unlike wage garnishments, which take a portion of each paycheck, a bank levy is a one-time event. The IRS sends a levy notice to your bank, and your bank must immediately freeze the available funds up to the amount of your tax liability.
If you do not take action within the 21-day freeze period, your bank will remit the frozen funds to the IRS, and they will be applied to your balance.
When Does the IRS Levy Bank Accounts? Understanding the Timeline
Most taxpayers will not experience a bank levy until their tax bill is significantly overdue—typically at least six months late, often longer. Before the IRS can touch your bank account, several legal requirements must be met:
- The IRS assessed your tax liability and sent a bill requesting payment.
- You ignored or declined to pay your tax debts.
- The IRS issued a Final Notice of Intent to Levy and notified you of your right to a hearing 30 days before the levy.
This notice is usually mailed to your last known address, but it may also be delivered in person at home or work. If you request a hearing on time, the IRS is prohibited from levying while your case is being reviewed.
Bank Levy Without Notice: When It Can Happen
While rare, the IRS is allowed to issue a bank levy without notice in a few specific situations. A levy may be issued immediately when the IRS believes the collection of tax is in jeopardy, when the action qualifies as a Disqualified Employment Tax Levy, or when the IRS is seizing federal or state tax refunds, which do not require a 30-day warning.
For nearly all other assets, including wages and property, the IRS must provide advance notice and give you the opportunity to appeal before proceeding.
Bank Account Levy Process: What Happens After the IRS Issues the Levy
If you do not respond to the Final Notice of Intent to Levy, the IRS will issue a levy to your bank—usually on Form 668-A. The bank must immediately freeze the funds in your account, but the IRS has not yet received them. You still have 21 days to:
- Contact the IRS
- Set up a payment plan
- Prove the levy was issued in error
- Request hardship relief
- Establish an installment agreement or another resolution option
Tax professionals emphasize that many taxpayers mistakenly believe the money is instantly gone. It is not. The 21-day freeze exists specifically to give you time to act.
If you do nothing, the bank must send the frozen money to the IRS on day 22—and banks always comply because they can be held personally responsible for the amount owed if they do not.
How a Bank Freeze Really Works
One of the biggest misconceptions is that a bank levy freezes your entire account. In reality, the levy only freezes the money available at the moment the levy arrives. You can still use your bank account normally, and you can deposit new funds and withdraw them freely, because the IRS cannot take future deposits unless it issues a new levy. Only the amount needed to cover your tax liability, including any penalties and interest, is frozen. If outstanding checks or automatic payments hit during the freeze, your bank may return them and assess overdraft fees.
Funds Exempt From an IRS Bank Levy
Certain types of funds are legally protected from seizure, including:
- Unemployment benefits
- Certain pensions and annuities
- Worker’s compensation
- Disability payments
- Public assistance benefits
- Child support judgments
Additionally, the IRS cannot seize money that legally belongs to someone else—even if that person shares an account with the taxpayer. For example, if you are only on your elderly parent’s account for convenience, those funds may be exempt once ownership is documented.
Bank Levy Fees
Banks are allowed to charge a bank levy fee, often around $100, for processing the levy. If the levy was issued in error and the IRS removes it, you may file Form 8546 to request reimbursement for bank charges. However, fees associated with a correct levy are not refundable.
How to Get the IRS to Release a Bank Levy
The IRS will release a levy if:
- You pay your tax liability in full
- You establish that the levy creates immediate financial hardship
- The levy was issued in error
- You enter into a payment plan or installment agreement that requires levy release
- Releasing the levy is in the best interest of both you and the United States
Hardship is defined as the inability to cover basic living expenses such as housing, utilities, food, or medical needs. Documentation—like eviction notices or utility shut-off warnings—may be required.
“One success story involved a client who suffered a bank levy that seized $20,000 in cash. This client had recently started a new business, and the levied funds were crucial for funding business operations. The immediate loss of these funds threatened the viability of the new venture. To get the funds released, the argument made was that it was imperative for the IRS to refund the cash because otherwise, the client would be unable to make the business profitable. The core of the argument was that the IRS’s best long-term strategy for collecting the delinquent tax was to allow the business to succeed, thereby generating future income. Initially, the Revenue Officer did not accept this argument. However, the case was escalated to the RO’s manager. By persuading the manager that returning the cash would facilitate future collection by enabling the business’s success, all $20,000 was successfully recovered.”
“Our client came to us upset and scared about a levy placed on his business bank accounts. He was seriously delinquent—tax liabilities spanned six years—and the levy threatened payroll and vendor payments. We obtained POA, reviewed IRS communication for procedural errors, and approached the Revenue Officer demonstrating why releasing the levy was in everyone’s best interest. We provided documentation and argued that without the funds, the business would fail and employees wouldn’t be paid. The RO agreed to release the levy—conditioned on setting up an affordable installment agreement.”
“A memorable success story involved a client who came to me in distress after her bank account was levied. We immediately contacted the IRS and initiated a dialogue, referencing Publication 594’s release criteria. By quickly gathering a comprehensive financial snapshot and drafting an installment agreement aligned with the IRS's Collection Process rules, we were able to present a compelling case for the levy’s release. Within three weeks, the IRS issued a Form 668-D release notice, and client's account was fully unfrozen. This swift resolution was achieved through proactive communication, strategic negotiation, and a thorough understanding of IRS procedures.”
Greg Daer, EA, explains how demonstrating a business turnaround helped reverse an IRS levy:
“The IRS wants to see a 'change in behavior' more than anything else. I had a business client that kept on owing payroll taxes every single quarter. The business was basically demonstrating to the IRS that it was not able to be profitable without owing taxes to the IRS. He was ready to close this particular business entity. I was able to persuade the Revenue Officer to give the taxpayer another chance. ‘Innocent third-parties’ (employees of the business) were not able to be paid their wages earned from their work for the business. I negotiated 60 days to turn the client's business around. My client was able to get caught up with payroll and show the IRS that it was a profitable business.”
“I had a client that had IRS Revenue Officer levy bank accounts and wages. I immediately engaged the agent with a 433-F budget and got the account releases and the wage levy removed. I also interface with the bank and employer myself since I can’t rely on the IRS to do this quickly, so I ask for a copy of all levy releases to send myself.”
How to Avoid a Bank Levy
Avoiding a levy is far easier than removing one. As soon as you receive the Final Notice of Intent to Levy, contact the IRS or a tax professional. Before the deadline, you can:
- Request an installment agreement
- Apply for an offer in compromise
- Request currently not collectible status
- Dispute the tax liability
- File a hearing request
Taking action during the notice period protects your bank account and preserves your rights.
FAQ: IRS Bank Levies
1. Can the IRS freeze your bank account without warning?
Generally, no. The IRS must first issue a Final Notice of Intent to Levy giving you 30 days to respond. However, a bank levy without notice is allowed in rare situations such as jeopardy collection, certain employment-tax cases, or when seizing tax refunds.
2. How long does the IRS freeze your bank account?
Your bank will freeze the funds for 21 days. This freeze gives you time to contact the IRS and arrange a resolution. If you do nothing, your bank must send the funds to the IRS on day 22.
3. Will the IRS take all the money in my account?
The IRS can take up to the amount of your tax liability, including penalties and interest. If you owe $10,000 and your balance is $7,000, the freeze will cover all $7,000. If you owe $10,000 and have $15,000, only $10,000 is frozen.
4. Can the IRS take future deposits?
Not from the same levy. An IRS bank levy is a one-time event. Only the funds available on the date the levy is served can be taken. New deposits are safe unless the IRS issues another levy.
5. What happens if the IRS levies exempt funds?
If the IRS levies money that should legally be exempt—such as disability payments or funds belonging to another person—you can contact the IRS to request an immediate release. Documentation is usually required.
6. How do I stop an IRS bank levy?
You can stop the levy by:
- Paying the balance in full
- Entering a payment plan or installment agreement
- Proving financial hardship
- Showing the levy was issued in error
- Filing an appeal
If you act during the 21-day freeze, you may be able to prevent the IRS from taking the funds.
7. How to avoid bank levy situations in the future?
The best way to avoid a levy is to respond to IRS notices early. As soon as you receive a bill or a notice of unpaid taxes, you can request an installment agreement, negotiate a settlement, or apply for relief programs. Ignoring notices leads directly to enforced collection.
8. Is a bank levy the same as a wage garnishment?
No. A wage garnishment takes a percentage of each paycheck until the debt is paid. A bank levy is a single event targeting the funds already in your account.
9. Can I get my money back after the IRS takes it?
Possibly, but only in limited circumstances—such as procedural errors, misapplied payments, or if returning the funds is in the best interest of both the taxpayer and the United States. Most levied funds are not returned.
10. Should I hire a tax professional?
Yes—especially when dealing with a bank levy. Professionals can negotiate directly with the IRS, secure levy releases, address tax liability disputes, and help you enter appropriate resolution programs.