The IRS levied my bank account. What happens now?
Your bank has received a notice of levy from the IRS. By law, the bank may not send the levied funds to the IRS until 21 days after the levy, and no withdrawals can be made from them in the meantime. That window is the time to act.
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How a bank levy works.
A bank levy reaches the money on deposit when the levy is made, up to the amount of the levy. Deposits made afterward are not caught by that levy, unlike a wage levy, which continues until it is released. The IRS can, however, levy again.
- The levy is madeThe IRS serves a notice of levy on your bank. It attaches to the funds on deposit at that moment, up to the amount of the levy.
- 21 calendar daysThe bank holds the levied funds, and no withdrawals can be made from them. During this period the levy is released only if the IRS notifies the bank of a release.
- The funds go to the IRSIf the bank has not been notified of a release, it must surrender the funds, up to the amount of the levy, on the first business day after the holding period.
IRC §6332(c); Treas. Reg. §301.6332-3(c). The IRS may request an extension of the holding period. IRC §6331(b) limits a levy to property and obligations existing when it is made; §6331(e) makes a wage levy continuous; §6331(c) permits successive levies.
When the IRS must release a levy.
The IRS must release a levy, in whole or in part, when it determines that one of these conditions exists. Release is requested from the IRS with the grounds stated; it is not automatic.
The liability is paid or no longer collectible
The balance has been satisfied, or the IRS's time to collect it has expired.
An installment agreement is in place
Once you have entered into an installment agreement, the levy must be released unless the agreement provides otherwise. A request that has only been submitted is not the same as an agreement entered into.
Economic hardship
For an individual, the levy must be released if the IRS determines it is leaving you unable to pay reasonable basic living expenses. The IRS will consider your financial information, and you must act in good faith.
Release will help collection
For example, where an arrangement such as escrow or a bond secures payment of the liability.
IRC §6343(a)(1)(A)–(D); Treas. Reg. §301.6343-1(b) and (c). A release does not prevent a later levy (§6343(a)(3)).
A different question from releasing this one.
Some rules stop the IRS from making a new levy. They do not, by themselves, undo a levy that was already made before they applied.
A pending offer in compromise
While an offer is pending, and for 30 days after a rejection (and during a timely appeal), the IRS may not levy for the tax the offer covers.
A pending or active installment agreement
The same restriction applies while an installment agreement request is pending, while an agreement is in effect, and for 30 days after a rejection or termination (and during a timely appeal).
A timely Collection Due Process hearing
A hearing requested within the 30-day window suspends the levy actions it covers while it is pending.
A levy made in violation of these rules
If a levy was made in violation of the law, for example while an offer in compromise was pending or without the required hearing notice, the IRS will release it and return the property.
IRC §6331(k)(1)–(3), which excludes levies first made before the request (by reference to §6331(i)(3)(B)(ii)); §6330(e); Treas. Reg. §301.6343-3(d).
A levy follows notice.
Before levying, the IRS generally must give written notice of its intent to levy, and of your right to a Collection Due Process hearing, at least 30 days in advance. That notice is usually an LT11 or Letter 1058. Limited exceptions apply, including jeopardy and levies on a state tax refund.
A hearing requested within the 30-day period that begins the day after the date of the notice suspends the levy actions it covers while it is pending, and its result can be reviewed by the Tax Court.
If that window has passed, an equivalent hearing can still be requested within one year. Appeals considers the same issues, but collection is not required to stop and there is no Tax Court review of the decision.
IRC §6331(d); §6330(a), (d), (e) and (f); Treas. Reg. §301.6330-1(i).
Levied money can sometimes be returned.
The IRS may return levied money if the levy was premature or not made in accordance with its procedures, if you enter into an installment agreement afterward that does not rule it out, if returning it will help collection, or if return is in the best interests of you and the United States.
IRC §6343(d); Treas. Reg. §301.6343-3(c). Return under these provisions is at the IRS's discretion.
We take it from here.
- We take controlOnce you sign the authorization, we deal with the IRS for you. Send us any IRS letter you receive.
- Exactly where you standEvery year, balance, penalty and filing, taken from your IRS record rather than estimated.
- Your deadlines, risks and leverageIncluding how much of the 21-day window remains, and which hearing rights are still open.
- Your Resolution RoadmapIn writing: where you stand, what happens if nothing is done, and which paths are open to you.
Primary sources: Internal Revenue Code §6331, §6332, §6330 and §6343; Treasury Regulations §301.6332-3, §301.6343-1, §301.6343-3 and §301.6330-1. General information, not advice for your situation.