IRS Bank Levy
Unfreeze Your Account. Fast.

Your Bank Account Has Been Frozen by the IRS — Here Is What to Do

An IRS bank levy is a legal seizure of the funds in your bank account. Unlike a wage garnishment, which is continuous, a bank levy is a one-time grab. The bank freezes the funds in your account on the day it receives the levy notice, and holds them for 21 days before sending the money to the IRS.

That 21-day holding period is your window of opportunity. During those 21 days, you can take legal action to get some or all of the funds released. After 21 days, the money goes to the IRS and recovery becomes much more difficult.

When a client calls about a bank levy, the first thing we do is verify the 21-day holding period. Banks are required to hold levied funds for 21 days before sending them to the IRS. That window is our opportunity to negotiate a release — and we have successfully released levies within days of filing Form 12153 (Request for a Collection Due Process Hearing). Speed is everything in these cases.

If you wake up to a frozen bank account, the most important thing you can do is act immediately. Do not wait. Every day that passes reduces your options and makes it harder to recover your money.

How the IRS Bank Levy Process Works

The IRS sends Form 668-A (Notice of Levy) to your bank. Your bank is legally required to freeze funds up to the amount owed on the date the levy is received. If you have $15,000 in your account and owe $50,000, the entire $15,000 is frozen. If you have $100,000 and owe $50,000, only $50,000 is frozen.

The bank holds the frozen funds for 21 days. During this period, you cannot access the levied funds, but deposits made after the levy date are generally available. However, the IRS can issue additional levies to capture new deposits.

After 21 days, the bank sends the frozen funds to the IRS. At that point, getting the money back requires filing a claim for wrongful levy or proving an error — both of which are significantly harder than addressing the issue during the 21-day holding period.

In our experience, the IRS does not levy bank accounts randomly. A levy typically follows a sequence: balance due notice (CP14), reminder notices, Final Notice of Intent to Levy (LT11 or Letter 1058), and then the actual levy. If the IRS skipped any of these steps, the levy may be procedurally defective — and we can challenge it. We review the IRS account transcript in every bank levy case to verify that proper procedures were followed.

How to Get Levied Funds Released

There are several legal strategies for releasing funds during the 21-day holding period:

• Economic hardship: Under IRC Section 6343(a)(1)(D), the IRS must release a levy if it creates an economic hardship — meaning you cannot meet basic, reasonable living expenses. We prepare a detailed financial analysis demonstrating hardship.
• Installment agreement: If you enter into a payment plan with the IRS, the levy must be released. We can often negotiate an installment agreement within the 21-day window.
• Offer in compromise: Filing an OIC triggers a statutory stay on collection, which can force release of a pending levy.
• CNC status: Demonstrating that you are currently not collectible can lead to levy release.
• CDP hearing: If the levy was issued improperly or you did not receive proper notice, a Collection Due Process hearing can halt the action.
• Levy release for compliance: The IRS may release the levy if you agree to come into compliance by filing all outstanding returns and setting up a payment arrangement.

Exempt Funds in Your Bank Account

Certain types of deposits may be exempt from IRS levy. If your bank account contains Social Security benefits, federal employee retirement benefits, certain veterans benefits, or child support payments, these funds may be partially or fully protected. However, once these funds are commingled with other deposits, proving which dollars are exempt becomes complicated.

We can trace exempt funds and argue for their release, but this requires prompt action and proper documentation.

Preventing Future Bank Levies

Releasing the current levy is urgent, but preventing future levies requires resolving the underlying tax debt. The IRS can issue new levies on your bank account at any time as long as the debt remains unresolved. We develop a comprehensive resolution strategy — whether that is an installment agreement, offer in compromise, CNC status, or another approach — that permanently stops collection activity.

Until your case is resolved, we take steps to protect your accounts, including filing a power of attorney that gives us standing to intervene if the IRS issues additional levies.

We have found that continuous bank levies (which hit every deposit, not just funds on the date of levy) are relatively rare for individual taxpayers but common for businesses. The distinction matters because the legal basis and release procedures differ under IRC §6331(h). For business clients facing a continuous levy, the urgency is even greater because every incoming payment from customers is immediately seized until the levy is released.

Joint Bank Accounts and Third-Party Issues

If you share a bank account with a spouse, business partner, or anyone else, the IRS may levy the entire account even though it only has a claim against you. The non-liable account holder can file a claim for return of wrongfully levied property, but this requires proof that the funds belong to them.

If you are concerned about a bank levy affecting a joint account holder, contact us immediately. We can help protect the non-liable party's funds and, if necessary, file the appropriate claims to recover money that should not have been seized.