How an IRS Bank Account Levy Works

An IRS bank account levy is one of the harshest and heartless collection mechanisms used by the IRS. If you are under the assumption the IRS will realize you won’t be able to feed yourself or put a roof over your head if they take your money, think again. If you are under the threat of a bank levy or have had your account frozen, it is important to understand how the levy works in order to take the appropriate actions to prevent the IRS from seizing your funds.

It really shouldn’t be any surprise when the IRS begins to levy. It is required that the IRS send you a "Final notice of Intent to Levy" prior to actually taking action. The IRS cannot begin a levy until 30 days have passed since they sent the final notice. Once those 30 days have passed the IRS will decide which method of levy to use. The three common methods of levies are bank levy, wage levy, and physical asset seizure. Since you are reading this article, they most likely have chosen a bank levy. A bank levy happens faster than the other kinds of levies and takes a lot less planning and effort on the part of the IRS, which is why they prefer to use this method.

Once the IRS chooses to levy your assets using a bank account levy they will track down your bank that you use. The IRS can normally find your bank account fairly easily. The most common way they find the bank is right from your tax return. If you have ever earned interest on any funds at your bank it is very likely that you listed your bank on your tax return, so this is the first place the will look. If you didn’t list it, they will still find it, just may take a little more digging for them.

Once they find your account they will contact the bank and find out how much money is in the account. If there is enough money for them to seize they will tell the bank that they intend to levy those funds and the bank will immediately freeze the bank account. When this happens you will not receive any notification the bank will just do it. The only way you will know is if you call and ask your bank or if you try to use your debit card for any reason you will get a notification.

The bank will honor the wishes of the IRS because if they don’t, the IRS can legally hold the bank liable for those funds that it could have seized. Once your account has been frozen the IRS cannot receive those funds for 21 days. The taxpayer can actually still take action against the IRS to try to prevent the seizure in this time. After the 21 days is up the bank will send the funds over to the IRS and those funds will go towards the outstanding tax debt owed by the taxpayer.

The important thing to realize is that you can take actions to stop this from happening. The IRS will never give you the benefit of the doubt under any circumstances. If you want to resolve your tax problem you must either setup an alternative agreement to pay the taxes to them or prove that it would be unfair for them to collect at the current time because it would limit your ability to provide food and a roof over your head for either just you or you and your family. Many times it is highly advised to use a tax professional when dealing with this type of tax problem. A tax professional can act quickly on your behalf and stop the IRS from taking collection actions and setup some sort of alternative agreement with them.

IRS Bank Levy
Everything you need to know about bank levies. How they work, how to release, FAQs, help, and more