Remove an IRS Bank Levy
An IRS bank levy is a one-time seizure of every dollar in the targeted account on the day the levy is served. After a 21-day holding period, the bank sends the funds to the IRS. The 21 days are the entire window to obtain a release.
Unlike a wage levy, which is continuing, a bank levy is a single-shot event. Each separate levy requires the IRS to issue a new Form 668-A. That means accounts are not permanently frozen, but the funds present on the levy date are gone unless the levy is released within 21 days.
The 21-Day Window
The 21-day holding period exists for one reason: to give the taxpayer time to demonstrate that the funds are not subject to levy or that the levy creates undue hardship. Acting fast matters because the bank ships the funds on day 22 regardless of any pending action.
Grounds for release include funds belonging to someone else, funds from sources not subject to levy such as certain pension distributions, economic hardship under IRC Section 6343, or a collection alternative being put in place.
Frequently Levied Account Types and Special Rules
Joint accounts: the IRS can levy a joint account based on the tax debt of one account holder. Non-liable owners must affirmatively claim their share through a wrongful levy claim under IRC Section 6343(b).
Business accounts: levies on operating business accounts often shut down payroll, accounts payable, and ongoing operations. Documenting that the business cannot operate without the funds is grounds for hardship release.
Retirement accounts: the IRS can levy IRAs and 401(k)s after issuing the Final Notice of Intent to Levy. Early withdrawal penalties may still apply to the taxpayer even though the IRS took the funds.
Preventing Future Bank Levies
Each separate levy requires separate IRS action, so a released or expired levy does not stop the next one. The only way to permanently end the threat of bank levies is to resolve the underlying tax debt through an installment agreement, OIC, CNC status, or full payment.
We typically build the long-term resolution while working the urgent release. The release stops the immediate harm; the resolution prevents the next one.
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Valley Tax Law represents clients throughout the Central Valley and Central Coast. Schedule a consultation at any of our offices, or by phone.
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