The IRS Just Froze My Bank Account

When the IRS issues a bank levy, your bank freezes the account but does not send the funds to the IRS immediately. There is a 21-day holding period during which the levy can be released. After 21 days, the bank turns the money over.

Here is the actual issue: most people learn about a bank levy when a debit card declines or a check bounces. They check their bank and see “legal hold” or “IRS levy” on the balance. The question is not whether the IRS can take the money — they can, by statute. The question is whether we can get the levy released before the 21 days run out.

The 21-Day Window

Under IRC §6332(c), a bank that receives an IRS levy must surrender the funds 21 days after the levy is served. During that 21 days, you can negotiate a release. If we get a release issued before day 21, the funds stay in your account. If we miss the window, the bank sends the money to the IRS and recovery is materially harder (though not impossible).

The 21 days starts on the day the bank receives the levy — not the day you found out. Day one matters. Get counsel engaged today, not next week.

What the IRS Will Accept to Release a Levy

The IRS will release a levy when it would create an immediate economic hardship under IRC §6343(a)(1)(D), when you propose an acceptable resolution (installment agreement, Offer in Compromise, CNC), or when there is a procedural defect in the levy itself.

The fastest releases come from one of three arguments:

• Economic hardship release. If the levy will prevent you from paying necessary living expenses (rent, food, utilities, medical) you can request release under IRC §6343(a)(1)(D). Requires financial documentation showing the hardship.
• Resolution proposal. If you propose and the IRS accepts an installment agreement, partial-pay installment, Offer in Compromise, or CNC status, the levy is typically released as part of the resolution.
• Procedural defect. If the IRS did not send a proper final notice (CP90/LT11) before the levy, or if the levy violates the CDP rights, the levy can be released for procedural reasons. Less common but worth checking on every case.

What to Do in the First 48 Hours

1. Confirm the levy amount. Get a copy of the levy from your bank (Form 668-A). Note the amount and the date the bank received it.
2. Pull your IRS account transcripts. Confirm which year(s) and how much the IRS claims you owe. Sometimes the levy amount and the actual liability disagree.
3. Engage counsel and file Form 2848. Once we are on file as your representative, the IRS communicates with us.
4. Identify the right release argument. Hardship requires financial documentation. Resolution proposal requires knowing your RCP. Procedural defect requires looking at the notice history.
5. Submit the release request. Most release requests are handled within 5-10 business days, well within the 21-day window. Urgent cases can be expedited through the Taxpayer Advocate Service.

What Happens If the 21 Days Already Ran

The bank sends the funds to the IRS. Recovery options narrow but do not disappear:

• Wrongful levy claim. If the funds did not belong to you (joint account with a non-debtor spouse, trust funds, third-party funds) the IRS must return them under IRC §7426.
• Hardship return. Under limited circumstances, the IRS may return funds when retaining them would cause hardship that did not exist at the time of the levy.
• Apply against the right year. Even if the money is gone, we can ensure it is credited to the right tax year — sometimes against the year closest to CSED, sometimes against the year with the highest penalty, depending on strategy.

For the resolution work that prevents the next levy, see our tax debt resolution cost page.