Many taxpayers worry about receiving a notice from the IRS and suddenly discovering their bank account has been frozen. Unfortunately, this situation can happen if tax debt remains unresolved for too long.
The IRS has the authority to place a levy on your bank account, but there are steps in the process and options available to stop it.
What Is an IRS Bank Levy?
An IRS bank levy allows the government to take funds directly from your bank account to satisfy unpaid tax debt.
Once a levy is issued, your bank is required to freeze the funds in your account up to the amount of the tax debt.
Unlike private creditors, the IRS does not need to go to court before issuing a levy.
What Happens When the IRS Freezes Your Account?
When a bank levy is issued:
• Your bank freezes the available funds in your account
• You cannot withdraw or transfer that money
• The bank holds the funds for a short period before sending them to the IRS
This can create serious financial hardship, especially if the frozen funds were intended for rent, payroll, or daily living expenses.
Is There Any Warning Before a Levy?
Yes. The IRS typically sends several notices before freezing a bank account.
These may include:
• Balance due notices
• Reminder notices about unpaid taxes
• A Final Notice of Intent to Levy
This final notice gives taxpayers the opportunity to respond before enforcement begins.
Ignoring IRS notices is one of the most common reasons levies occur.
How Long Does the Bank Hold the Money?
Once your bank account is frozen, the bank usually holds the funds for 21 days before sending them to the IRS.
This short window can provide an opportunity to resolve the situation before the money is transferred.
During this time, a tax professional may be able to negotiate a release of the levy.
Can a Bank Levy Be Stopped or Removed?
In many cases, yes.
A levy may be released if:
• A payment plan is established
• An Offer in Compromise is submitted
• The taxpayer qualifies for financial hardship status
• The levy was issued in error
Taking action quickly is critical because once the funds are sent to the IRS, recovering them becomes much more difficult.
What If the Levy Creates Financial Hardship?
If the levy prevents you from paying basic living expenses, the IRS may release the levy after reviewing your financial situation.
This usually requires submitting financial documentation and working with the IRS to establish an alternative resolution.
Do Not Wait Until Your Account Is Frozen
Many taxpayers ignore IRS notices until enforcement begins. By that point, options may be more limited.
Addressing tax debt early can help prevent aggressive collection actions such as wage garnishments or bank levies.
Bank Levy vs. Wage Garnishment
A bank levy is a one-time seizure: it attaches to the money in your account on the day the bank receives it, not to deposits you make afterward. The IRS can, however, issue another levy later. A wage garnishment (wage levy) is different because it continues with every paycheck until it is released.
Which IRS Notices Come Before a Bank Levy?
The IRS generally sends a series of letters before it levies a bank account:
- CP14: the first notice that you have a balance due
- CP501 and CP503: reminder notices that the balance is still unpaid
- CP504: notice of intent to levy, which can include certain state tax refunds
- LT11 or Letter 1058: the Final Notice of Intent to Levy and Notice of Your Right to a Hearing
The final notice is especially important. You generally have 30 days from the date on that letter to request a Collection Due Process hearing with IRS Form 12153, which can pause most levy action while your case is reviewed. If you are behind on these notices, read what happens if you ignore IRS letters.
What to Do If Your Bank Account Is Frozen
- Read the levy notice. The bank receives IRS Form 668-A, and you should receive a copy or a notice from your bank. Note the date.
- Act within the 21-day window. The bank holds the funds for 21 days before sending them to the IRS. That is the time to request a release.
- Gather your financial information. The IRS will usually want to see your income, expenses and assets, often on a collection information statement such as Form 433-F or 433-A.
- Request a release based on a resolution. Common paths include an installment agreement, Currently Not Collectible status for economic hardship, or an Offer in Compromise.
- Get professional help if the deadline is close. Our bank levy release team can contact the IRS on your behalf.
Frequently Asked Questions
Can the IRS levy a joint bank account?
Yes. The IRS can levy a joint account even if only one owner owes the tax. A co-owner who does not owe the debt may be able to file a wrongful levy claim to recover their share of the funds.
Does a bank levy take money I deposit later?
No. A bank levy only captures the funds in the account when the bank receives the levy. Unless the debt is resolved, though, the IRS can issue another levy in the future.
Can I get the money back after it is sent to the IRS?
It is much harder. The IRS can return levied funds in limited situations, such as a levy issued in error or certain hardship cases, which is why acting during the 21-day holding period matters.
Get Help From Tax Relief Systems
If you have received IRS notices or are worried about a bank levy, taking action now can protect your financial stability.
If you have questions about IRS bank levies or owe more than $10,000 to the IRS, we can help you explore your options and work toward a resolution.
Tax Relief Systems LLC
Phone: (877) 807-3133
Schedule a consultation:
Email:
info@taxreliefsystemsllc.com