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IRS Bank Levies

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If the IRS has levied your bank account, the money isn’t gone yet. When a bank receives an IRS levy, it has to freeze the funds in your account up to the amount you owe, and then hold them for 21 days before it sends anything to the IRS. Those 21 days are the window we work in. It’s usually enough time to get the levy released or to put an arrangement in place that the IRS will accept, as long as someone starts on it right away.

We know how alarming it is to find your account frozen with no warning from the bank. The warning came earlier, from the IRS, and that matters for what you can do now.

What an IRS bank levy actually takes

A bank levy is a one-time seizure. It reaches the money that’s in the account on the day the bank receives the levy, up to the balance due. It doesn’t attach to deposits that land afterward, so your next paycheck isn’t caught by that same levy. The IRS can issue a new levy later if the debt is still unpaid, and that’s why the goal is to resolve the balance rather than just get through this one.

Savings, checking and money market accounts can all be levied. A levy on wages works differently because it continues from paycheck to paycheck. If that’s what you’re facing, our wage garnishment page covers it, and bank levy vs wage garnishment helps if you’re not sure which one hit you.

The notices that came first

The IRS can’t levy a bank account out of nowhere. Before it does, it sends a bill, then a notice of intent to levy such as the CP504 (after which the IRS can already take a state tax refund), and then a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058 or LT11). That final notice has to be sent at least 30 days before the levy.

If you’re still inside that 30-day window, you can request a Collection Due Process hearing, which generally stops the levy while the appeal is pending. Our collection appeals page explains how that works. If you have a CP504 in hand and nothing has been frozen yet, read what a CP504 means and how to prevent a levy.

What happens during the 21-day hold

The bank holds the levied funds for 21 days. During that time, the IRS can release all or part of the levy, and if it does, the bank gives the money back to you instead of sending it on. Once the 21 days pass without a release, the bank sends the funds and they’re applied to your tax debt.

So the clock that matters is the bank’s, not the IRS’s. We’d rather hear from you on day 2 than on day 19.

Joint accounts and money that isn’t yours

The IRS can levy an entire joint account to collect one owner’s tax debt, as long as that owner can withdraw from it. If part of that money belongs to a co-owner who doesn’t owe the tax, or to someone else entirely, that person can ask for it back. The request is a written wrongful levy claim sent to the IRS Collection Advisory Group for the area where the levy was made, and it generally has to be made within two years from the date of the levy. If the claim is denied, it can be appealed. Records that show whose deposits made up the balance are what decide these claims.

How a bank levy gets released

The IRS is required to release a levy in certain situations, and it will negotiate a release in others. The most common routes are:

  • Paying the balance in full. Not realistic for most people, but sometimes a partial payment plus an arrangement does the job.
  • An installment agreement. Once an agreement is in place, the IRS generally releases the levy unless the agreement says otherwise. See our IRS installment plans page.
  • Economic hardship. If the levy is leaving you unable to meet basic living expenses, the IRS can release it on hardship grounds. The account may then be placed in currently not collectible status while your finances stay the same.
  • An offer in compromise. The IRS generally won’t levy while an offer is being considered. An offer doesn’t undo a levy that’s already been made, but it can be part of a longer plan. See IRS offer in compromise.

Federal law also protects a short list of income from IRS levy, including unemployment benefits, certain public assistance such as SSI, workers’ compensation, certain service-connected disability payments and court-ordered child support. Social Security retirement and disability benefits aren’t on that list, and the IRS can take up to 15 percent of those payments through a separate program. If the frozen money came from a benefit payment, tell us at the start, because it changes the conversation.

How we handle a bank levy

When you call, we pull your IRS account transcripts the same day so we know exactly which years and balances are behind the levy. With your power of attorney on file, we contact the IRS unit that issued it, propose the arrangement that fits your finances, and ask for the release while the bank is still holding the money. If there’s a CP504 or a final notice on the account that hasn’t turned into a levy yet, we work to keep it that way.

Bank levies are one of several IRS collection tools. See our IRS tax levy overview for how they compare to wage garnishment and other levy types. If you live on Long Island, IRS bank levies on Long Island walks through what can be frozen and how people get access back.

Questions people ask about IRS bank levies

How often can the IRS levy a bank account?

A bank levy is a one-time action, so it only takes what’s there that day. There’s no rule that stops the IRS from issuing another one later while the debt remains unpaid, though. That’s why a release on its own isn’t the end of the work. An agreement that covers the balance is.

How long does it take for a levy to be released?

There’s no set IRS timeframe. Once the IRS agrees to release a levy, it sends a release to the bank, and how long that takes depends on the case. What we can control is having your financial information and a workable proposal ready, which is why we start inside the 21-day hold rather than after it.

What type of bank accounts cannot be levied?

There isn’t an account type that’s immune. What the law protects is certain kinds of income, such as SSI and unemployment benefits, not the kind of account. Once protected money is mixed into an ordinary checking account, it can be harder to show, so records matter.

How do I know if my bank account is levied?

Your bank will usually tell you, often by letter or when a transaction is declined. The IRS will have sent the final notice of intent to levy at least 30 days earlier. If you’re not sure whether a hold is from the IRS, a state agency or a private creditor, we can check your IRS transcripts and tell you.

If the IRS has frozen your account, call Fine & Clear Tax Solutions at 516-209-2594 or request a free consultation. The sooner we start, the more of the 21 days we have to work with.