IRS Bank Account Levy Frequently Asked Questions (FAQs)

irs bank levy frequently asked questions

What Is an IRS Bank Account Levy?

A bank account levy is when the IRS seizes the funds in your bank account to cover your tax debt. The IRS contacts the bank, the bank freezes your money, and the bank sends the money to the IRS on the 21st day.

How Can a Tax Professional Help With an IRS Bank Account Levy?

A tax professional looks at your situation and helps you find the best tax resolution to stop or release the tax levy. Their advice can help you avoid a bank account levy or prevent the funds from being taken once the bank has frozen them. It’s important to note, however, that once the IRS has your money, it is difficult to get it back.

Can You Stop a Bank Account Levy Once the Bank Freezes the Account?

Yes, you can stop a bank account levy after your bank has frozen the funds. However, you only have 21 days, and if you miss that window, your bank will send your money to the IRS.

Can I Get Back the Money the IRS Seized From My Bank Account?

Usually, you cannot get the money back once the IRS takes it (of course there are exceptions). That money goes toward the tax you owe. If you want to make arrangements, you need to do that before the funds are gone. You have 30 days after receiving the Final Notice of Intent and an additional 21 days after the bank has frozen your account.

What If I Can’t Pay My Other Bills Since My Account Is Frozen?

The IRS doesn’t care if you can’t pay your other bills. However, if you can prove that the levy is causing severe financial hardship, the IRS may be willing to remove the tax lien. You need to apply for hardship status. You can request a free consultation above.

How Can I Avoid an IRS Bank Account Levy?

You can avoid a bank account levy by keeping in good standing with the IRS. You need to file all tax returns. Furthermore,  if you cannot pay in full, you at least have an agreement with the IRS. Even if you cannot pay taxes owed, it is essential to work out an arrangement with the IRS to prevent enforced collection action (wage garnishment, levies, and liens).

What Are the Laws on IRS Bank Account Levies?

The IRS has tremendous power when it comes to seizing assets such as funds in your bank account. However, before the agency can take your money, the following three things must usually happen (with exceptions):

  1. The IRS must assess a tax liability and send you a notice.
  2. You must fail to pay or fail to make other arrangements.
  3. The IRS must send a final notice of intent to levy. The letter must explain that you have 30 days to appeal or make payment arrangements.

If the IRS skips any of these steps, you can get the levy reversed based on procedural errors. However, the IRS only needs to send you a notice of your rights once for each tax period.

What Are Some Exceptions To the Rules Above?

The IRS does not need to give you 30 days notice to a hearing if:
  1. It feels collection of the tax money you owe is jeopardy (flight risk)
  2. To collect tax from a state tax refund
  3. The IRS served a Disqualified employment tax levy
In these situations, the IRS will send you a notice of your appeal rights after it issues the levy.

How Many Times Can the IRS Levy Your Bank Account?

The IRS can levy it a bank account more than once. When the IRS levy’s you, it is not a standing levy, which means you can deposit money the next day.  An IRS bank levy attaches to funds once the bank processes the tax levy. If you make a deposit a few days later, the bank should not freeze it. The IRS would have to send another levy to the bank, but this is unlikely as it usually won’t happen quickly.

What to Do If the IRS Levied a Bank Account I Had Signature Authority for Only?

The person or a licensed professional representing the person who had their bank account levied by the IRS should call the telephone number received on Form 668-A(C)DO.  At this point, they need to explain to the IRS how the funds in the account belong to them. You may need to substantiate this claim with documentation. For example, say you have a bank account with signature authority for your father, but it is primarily your bank account and your money. The IRS could levy the bank account for taxes your father owes.