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What to Do When You Have a Bank Levy

In a bank levy, the IRS requests that a bank transfer funds from a delinquent taxpayer’s bank account to settle back taxes. A bank levy can cause financial strain on the taxpayer, as the entire amount of the account – up the full amount owed – can be taken.

1. Contact the IRS

bank account levyTo get a levy released, you may either contact the IRS yourself or have your legal representative contact them. Before contacting the IRS, you should review the options you have to resolve your back taxes.

Before releasing a levy, the IRS wants to guarantee that the balance due will be satisfied. There are circumstances such as a ‘hardship’ that may allow the releasing of a bank levy without full payment of back taxes. To better understand your options, review the IRS payment plans.

2. Use a Payment Plan

The speediest way to get a bank levy released is to set up a payment plan with the IRS. There are a variety of payment plans for taxpayers of various financial means:

  • Those that have the financial ability to pay their entire back taxes may choose an Installment Agreement to pay the amount in fixed monthly installments.
  • Those with limited financial resources may request an Offer in Compromise or a Partial Payment Installment Agreement to resolve their back taxes permanently.
  • Those with no ability to pay can obtain the status of Currently Not Collectible to stop all IRS collection actions, including a levy.

3. Hardship

If a taxpayer is driven into a financial crisis by any IRS collection action, then the tax agency cannot persist. A financial crisis is a situation where the taxpayer is unable to meet basic, allowable living expenses such as those on food, clothing, etc. For detailed information on allowable living expenses, search for ‘National Standards: Food, Clothing and Other Items’ on irs.gov.

4. The Process of Levy

When facing a bank levy, it is critical to understand how the IRS proceeds.

Taxpayers may expect to receive notices regarding the payment request in the mail, weeks prior to the levy. After the final notice of the levy, the IRS proceeds to contact the bank.

Before actually getting the money transferred, the IRS provides a 21-day waiting period to the bank. This period is provided to allow resolution or notify the IRS of any errors.

Before the levy is initiated, the taxpayer can contact the IRS and implement a resolution. If both the taxpayer and the IRS agree on the resolution, the levy is released. However, if the taxpayer defaults on the resolution agreement, the IRS may reinstate the levy.