Bank Levy Attorney

What the bank does when an IRS bank levy arrives

The bank freezes whatever is in the account at the moment Form 668-A arrives, holds it for 21 days under section 6332(c) of the Internal Revenue Code, and then sends it to the IRS unless a release gets there first. The levy is a single event. It does not reach deposits made after it arrives, so a paycheck deposited the next day is yours, and it does not repeat unless the IRS serves a new one. The bank will not call the IRS for you, and it will often charge a fee of around $100. Under section 6332(d) a bank that ignores a levy is liable for the amount plus a 50 percent penalty, so it complies every time. A bank levy is also supposed to come only after the LT11 or Letter 1058 and the 30-day hearing window under section 6330, so the first thing we check is whether that notice was ever mailed to a good address.

Getting a bank levy release inside the 21 days

The IRS releases a bank levy on Form 668-D when one of the six conditions in section 6343(a) is met, and the practical ones are an installment agreement, currently not collectible status and economic hardship. Hardship means the levy leaves you unable to pay basic, reasonable living expenses under Treasury Regulation section 301.6343-1, and it is proven with this month’s bills. An installment agreement works when you can show the payment; a pending request already bars a new levy under section 6331(k), and a signed agreement gets the frozen funds released when its terms say so. Procedural defects are the third path: no final notice, a levy during a pending hearing or offer, or a levy on a year whose statute under section 6502 had expired, each of which requires release and, under section 6343(d), a return of money already sent.

The timeline, honestly: day one we file Form 2848, pull the transcripts and get the levy’s date from the bank. Days one through three we call the Automated Collection System or the assigned revenue officer with a proposal and the financial statement. A release on an agreed installment agreement or a documented hardship typically issues within a few business days of that call, and we ask the IRS to fax the 668-D to the bank while we are on the phone. If the IRS says no, a Collection Appeals Program request on Form 9423 gets a manager’s review inside the window.

Joint accounts, business accounts and other people’s money

The IRS can levy an entire joint account for one owner’s tax, and the other owner’s remedy is a wrongful levy claim proving the money is theirs. The IRS’s position is that if you can withdraw the funds, it can levy them, so a parent’s account you were added to for convenience, or a spouse’s separate earnings in a joint account, get frozen with everything else. Section 6343(b) lets the person who is not liable claim the funds back within two years, and the IRS tells joint owners to call the number on Form 668-A with proof of where the deposits came from: pay stubs, benefit statements, a deed or a trust document.

Business accounts turn on who owes the tax. A corporation or an LLC is a separate person, so the IRS cannot levy the company’s account for the owner’s personal income tax unless it can show the company is a nominee or an alter ego. When the levy is for the business’s own payroll tax, the account it hits is usually the one payroll clears through. Employees are not a hardship in the statutory sense, so the argument is section 6343(a)(1)(B): releasing the levy will help the IRS collect, because a business that misses payroll stops generating the receipts the IRS wants. That argument works when it comes with a Form 433-B, a current payroll register and a plan for the trust fund deposits going forward.

FTB, EDD and CDTFA bank levies

California’s agencies hold levied bank funds for a shorter period than the IRS, and none of them owe you a hearing before the money moves. The FTB’s Order to Withhold (FTB 2900) is issued under Revenue and Taxation Code section 18670, takes 100 percent of the funds on deposit up to the balance, and the statute requires the bank to transmit the money not less than ten business days after receipt. The FTB modifies or releases the order for financial hardship on a financial statement, and it reimburses bank charges on a levy issued in error if you write within 90 days. The EDD’s Notice of Levy under Unemployment Insurance Code section 1755 is treated as a single event for a bank, reaching only the funds on deposit when it arrives, and the bank holds and remits after ten but no later than fourteen business days.

The CDTFA’s Notice of Levy under Revenue and Taxation Code section 6702 captures the funds on deposit that day, the bank holds them for ten days, and the CDTFA has to release the levy on proof of significant financial hardship or payment in certified funds. Its hardship hearing is before a supervisor on a CDTFA-403-E financial statement, a claim of exemption using the list on CDTFA-425 is due within ten days of delivery or 15 days of mailing, and a third party’s claim to the money has to be filed before the bank transfers it. The CDTFA side is on our CDTFA collections page.

What to have ready

The bank’s letter with the date and time the levy was received, a copy of the levy form if the bank will give it to you, the last three months of statements showing the source of every deposit, the LT11 or Letter 1058 and its envelope, proof of any payment plan, offer or hearing request already pending, this month’s rent or mortgage and utility bills, and for a business the payroll register and the next deposit dates. If the balance behind the levy is larger than the account, the levy is a symptom, and the cure is on our tax debt attorney page.

How long does an IRS bank levy last?

It is a one-time seizure of the money on deposit when the levy arrives. The bank holds those funds for 21 days under section 6332(c) and then sends them. New deposits are not affected and the account is not frozen going forward, but the IRS can serve another levy later if nothing is resolved.

Can the IRS take money from a joint account?

Yes, and it will take the whole balance if the person who owes has the right to withdraw it. The co-owner can make a wrongful levy claim under section 6343(b) within two years with proof that the deposits were theirs, and the IRS releases or returns that share. Speed matters more than form here.

Can I get the money back after the bank sends it to the IRS?

Sometimes. Under section 6343(d) the IRS can return levied funds when the levy was premature or against procedure, when you enter an installment agreement, or when the return will help collection, and a third party has two years for a wrongful levy claim. The FTB, the EDD and the CDTFA treat sent funds as a refund claim, which is harder.

How long does the FTB hold a bank levy?

Not less than ten business days, under Revenue and Taxation Code section 18670. The EDD’s hold runs ten to fourteen business days under Unemployment Insurance Code section 1755, and the CDTFA’s is ten days. The FTB modifies an order for documented financial hardship, and each agency releases a levy it issued in error.