If the IRS has levied your bank account

Lien versus levy

People often use the words lien and levy as if they mean the same thing, but they are different tools. A lien is a legal claim against your property that secures the debt without taking anything. A levy actually takes property, such as money from a bank account or a paycheck.

The IRS can levy property you hold, like a car, and property held by others, like wages and bank accounts, unless the property is exempt. A levy is normally the last step in a sequence. The IRS page says that before levying it usually has assessed the tax, sent notice and demand, sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before, and given notice of third-party contact.

Why you may have seen it coming

If you recall a letter titled LT11 or Letter 1058, that is the final notice. It tells you the IRS intends to seize property and carries a right to a Collection Due Process hearing. The deadline for requesting that hearing is printed on the notice, and for levies it is generally about 30 days. A timely request generally stops levy action while the hearing and any Tax Court review proceed.

Imagine a small-business owner who set the final notice aside during a busy season and then found a hold on his checking account. He still has options, but they now run through calling the IRS about the levy itself, along with a late hearing request if the timing allows.

Getting a levy released

The IRS says it must release a levy if it finds that the tax is paid, the collection period has ended, release will help collect the tax, an installment agreement does not allow the levy, or the levy is causing economic hardship. It also releases when the value of the property exceeds the debt and release will not hinder collection. The IRS page notes that release for a bank levy is discretionary, in contrast to wage levies, where immediate hardship requires release.

To ask, contact the IRS at the number on the levy or related correspondence, and have your financial information ready. For a hardship request, be ready to show your income and your essential monthly expenses. If the IRS denies the request, the denial can be appealed under the Collection Appeals Program described in Publication 1660.

• Payment in full, or an approved payment plan that does not allow the levy.
• Economic hardship that you can document.
• A showing that release will help the IRS collect the tax.
• Wrongful levy, which is a separate situation with its own rules.

Hearings and payment plans

A Collection Due Process hearing is held by the IRS Independent Office of Appeals. It considers collection alternatives, and it considers the underlying liability only if you did not have a prior chance to dispute it. A late request may still receive an equivalent hearing, but without court review.

A payment plan is often the most practical way to keep a levy from returning. The IRS says it generally does not take enforced collection while a plan is being considered or in effect, for 30 days after a rejection or termination, or during an appeal. The IRS also notes that penalties and interest continue until the balance is paid, so a plan does not stop the balance from growing.

What not to do

Do not assume the bank can resolve the matter, because it is acting on the IRS's instruction, and do not wait on paperwork if your rent or payroll depends on the account. Call the IRS first, then follow with documents. Do not ignore later notices either, since a levy release does not cancel the debt.

Keeping a clear record

Write down the date of the levy, the name of the IRS employee you spoke with and what was promised. Keep a copy of every financial statement you submit. A short, organized written follow-up helps if the facts are disputed later. IRS Audit Defense Pro is software that helps you organize your facts and draft a letter you review and send yourself; it is not a law firm or tax professional and cannot promise a release. If the amount in your account was needed for urgent expenses, the Taxpayer Advocate Service may also be able to help.

Frequently asked questions

Sources

• IRS: What is a levy?
• IRS: How do I get a levy released?
• IRS: What if a levy is causing a hardship?
• IRS: Collection Due Process FAQs
• IRS: Payment plans and installment agreements

Related guides

• Understanding an LT11 or Letter 1058 noticeAn LT11 or Letter 1058 is a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
• How to request a Collection Due Process hearingFind the Collection Due Process notice, note the deadline printed on it (generally about 30 days), complete Form 12153 with your reasons, attach what applies, and send it to the hearing address on the notice.
• How to set up an IRS payment planIf you cannot pay in full, the IRS offers short-term and long-term monthly payment plans.
• Part of your paycheck is going to the IRS: what that meansPeople often say wage garnishment for what the IRS calls a wage levy.
• You received notice of a federal tax lienA federal tax lien is the government's legal claim against your property for unpaid tax, and a Notice of Federal Tax Lien is the public filing that tells creditors about it.
• The Taxpayer Advocate Service: Help When an IRS Problem StallsThe Taxpayer Advocate Service is an independent office within the IRS that can help when an IRS problem is causing financial hardship, has gone unresolved for more than 30 days, or the IRS missed a promised date.