IRS Bank Levies

An IRS bank levy can feel like the floor drops out from under you. One day your account looks normal. The next day, your bank tells you funds are frozen or unavailable, and you are trying to figure out how you will cover payroll, your mortgage, or basic living expenses. The good news is that bank levies follow rules, they typically do not happen without warning, and in many cases there are practical ways to stop the levy, get funds released, and put a long term resolution in place.

Frazier Law helps individuals, families, and businesses respond quickly and effectively to IRS collection actions, including bank levies. Led by principal attorney Charles R. Frazier and certified public accountant (CPA) Rick Miller, the firm has helped clients since 2009 with tax controversies and IRS defense. Charles is a former IRS agent and holds an LL.M in Taxation from The University of Alabama, Tuscaloosa. He is also a Chartered Financial Consultant (ChFC) through The American College of Financial Services. With a multi state practice and federal authority, and licensing in Tennessee, Michigan, and Texas, Frazier Law handles complex federal tax matters regardless of where you live.

What an IRS Bank Levy Is and What It Is Not

A bank levy is the IRS’s legal seizure of funds held in your bank or credit union account to pay a tax debt. The levy is directed to the financial institution, not to you, and it requires the institution to hold and then surrender available funds up to the amount listed on the levy.

It helps to separate a levy from related IRS actions that often show up around the same time:

An IRS tax lien is a legal claim against your property as security for the debt. A lien can impact credit, financing, and the ability to sell assets, but it does not by itself remove money from your account.

A bank levy is the taking event. It is what moves money out of the account after the required holding period, unless the levy is released or resolved.

A wage levy is usually continuous, meaning it can keep attaching future wages until released. A bank levy is generally a one time snapshot of what is available in the account at the moment the levy hits, although repeat levies can occur if the underlying problem is not addressed.

How the IRS Typically Gets to a Bank Levy

Bank levies rarely come out of nowhere. Most are the end result of a collection path that includes notices, opportunities to respond, and escalating consequences. Many taxpayers only realize how serious things have become after they miss or misunderstand a final notice. Others are dealing with a move, a business disruption, a health issue, or an overwhelmed mailbox, and the paper trail gets lost.

In many cases, the IRS must provide a final notice of intent to levy and a notice of your right to a hearing. That final notice is often associated with letters such as LT11 or Letter 1058. The timeline matters because there is typically a limited window to request a Collection Due Process hearing, which can pause levy action and open a structured forum to propose a resolution.

There are exceptions and special situations, including certain state refund levies, federal payment levies, or cases the IRS treats as jeopardy collection, but for most standard income tax and payroll tax collection cases, the IRS follows a notice sequence before levying a bank account.

What Happens When Your Bank Receives a Levy

Once the IRS serves the levy on your bank, the bank is expected to promptly process it and freeze affected funds. That freeze often feels like a sudden shutdown because debit card transactions may decline, checks may bounce, and scheduled payments may fail.

For bank account levies, federal law provides a 21 day holding period. During that time, the bank holds the funds subject to levy before sending them to the IRS. The point of the holding period is to give you time to contact the IRS, raise errors, request relief, or arrange a resolution that results in a release.

Two practical details matter here.

First, the levy generally attaches what is in the account at the moment the levy is processed, up to the levy amount. If you deposit new funds after the levy hits, banks typically treat the levy as a snapshot and do not automatically send later deposits under that same levy, but you should not assume new deposits are safe because the IRS can issue another levy, and banks can have internal processing differences. If you are in crisis, professional guidance can help you avoid making the situation worse.

Second, banks may also freeze joint accounts if the levied taxpayer is an owner. That can create immediate family pressure and raises questions about how much of the account belongs to each owner under state law. Addressing that correctly often requires a fast, careful approach.

Common Triggers That Lead to Bank Levies

In real life, IRS bank levies often happen after one or more of these issues:

• You filed returns but could not pay, and the balance grew with penalties and interest.
• You did not file one or more returns, the IRS created a substitute for return, and the assessed balance is higher than it should be.
• A payment plan defaulted, often because estimated payments were missed, a new balance was added, or the IRS did not apply payments as expected.
• A business fell behind on payroll tax deposits or trust fund taxes, and the IRS escalated to enforced collection.
• IRS notices went to an old address, or your IRS online account was not monitored, so deadlines were missed.

The important point is that a levy is usually a symptom, not the disease. Stopping the levy is urgent, but the long term win is fixing the underlying compliance and resolution issues so the IRS has no reason to keep pushing.

Immediate Steps to Take If Your Account Is Frozen

When the clock is running, the goal is to protect essentials, stop further collection where possible, and position the case for a release or alternative.

Confirm the Details and Get the Levy Information

Ask the bank for the date the levy was received, the amount listed, and which accounts were affected. If you can, get a copy or reference number. The levy date tells you where you are in the 21 day holding period.

Do Not Ignore the 21 Day Window

That holding period is your short runway. If you wait until the funds have been sent to the IRS, recovery is more difficult. Not always impossible, but harder and slower.

Avoid Actions That Create New Problems

Do not move money around in a way that looks like you are trying to evade collection. Do not drain accounts and hope the IRS disappears. Do not rely on generic internet advice about opening new accounts, putting everything in someone else’s name, or closing your business. Those decisions can backfire, especially if there are payroll taxes, business receivables, or prior collection history.

Bring a Tax Professional In Quickly

A levy response is time sensitive and detail heavy. A good strategy usually requires more than one lever: communication with the IRS, proper financial documentation, and a realistic resolution proposal. Frazier Law’s team approach, with both tax controversy legal experience and CPA level financial analysis, is designed for exactly this kind of moment.

How Frazier Law Works to Stop or Release a Bank Levy

There is no single solution that fits every case. The best path depends on why the IRS levied, how much is owed, whether returns are filed, whether the taxpayer can pay, and whether the IRS followed the required procedures. Below are the most common approaches we evaluate and deploy, often in combination.

Requesting a Levy Release

Federal law gives the IRS authority and, in some situations, a requirement to release a levy. A levy may be released if the liability is paid or becomes legally unenforceable, if release will facilitate collection, if an installment agreement is entered into that requires release unless the agreement allows the levy, or if the levy is creating an economic hardship under the applicable standards.

Hardship is not just a feeling. It is a documented inability to pay reasonable basic living expenses. For businesses, the analysis is different, but there are still arguments centered on keeping the business operating so the IRS can actually collect over time.

Setting Up the Right Payment Arrangement

Sometimes the fastest way to stop collection is a properly structured installment agreement. The key word is properly. A rushed request without complete financial information can lead to an agreement that is unaffordable, defaults, and lands you right back in enforced collection. We focus on building an agreement you can actually keep, and one that fits the facts of your case.

Offer in Compromise Evaluation and Submission

If you cannot pay the full balance within a reasonable period, an Offer in Compromise may be an option. The IRS will look at your assets, income, expenses, and future ability to pay. The value is not only in submitting an offer, but in submitting a defensible offer that reflects the IRS’s financial standards and avoids preventable denials.

Even when an offer is not viable, the same financial analysis often points to other solutions, such as temporary hardship status or a manageable installment agreement.

Currently Not Collectible and Hardship Relief

If your finances truly cannot support payment after reasonable living expenses, the IRS may place the account in Currently Not Collectible status. This does not erase the debt, and interest continues, but it can stop active collection and give you breathing room. For many people, that breathing room is what allows them to regain stability, file returns, and plan a realistic next step.

Challenging Errors and Procedural Problems

Levies sometimes happen when there is a mistake, such as payments not credited, identity issues, an incorrect assessment, or notice problems. In other situations, a levy is issued even though the taxpayer is in a protected status, such as an active bankruptcy case, or when a timely appeal should have paused collection. Identifying and proving the issue can change the entire trajectory.

Special Issues in Bank Levy Cases

Joint Accounts and Family Financial Shock

Joint accounts are common, and they are also common sources of panic after a levy. The IRS can levy an account titled to the taxpayer, even if another person also has rights to the funds. Resolving the situation may involve showing that a portion of the funds belongs to the non liable party under state property rules and banking arrangements. These cases move quickly and require careful documentation.

Social Security and Other Benefit Deposits

Many people assume certain benefits cannot be touched. In practice, treatment depends on the type of payment and where it is held. Some federal benefit payments have special rules at the banking level, but tax levies operate under federal tax collection law, which has its own framework. If your account contains benefit deposits, mixed funds, or protected payments, it is critical to analyze the facts before you assume the money is safe or automatically recoverable.

Business Accounts, Payroll, and Operational Survival

For businesses, a bank levy can halt payroll, vendor payments, and operations overnight. The IRS may levy business operating accounts, and when payroll taxes are involved, the IRS tends to take collection very seriously. In these situations, we often prioritize stabilizing operations while pursuing a resolution that protects the business’s ability to generate revenue, because revenue is what makes any long term plan possible.

Preventing Future Levies After You Put Out the Fire

Stopping the levy is only step one. The next step is preventing the next levy. Most repeat levy situations happen because the taxpayer does not complete the underlying tasks the IRS requires for a lasting resolution.

Get and Stay Compliant

The IRS generally expects all required returns to be filed before it will approve many resolution options. Staying current also includes making estimated payments when required and keeping payroll tax deposits on schedule for businesses.

Understand Why the Case Escalated

A levy is often the result of a missed deadline, a default, or an unresolved notice. Once we see the account transcripts and the collection history, patterns become clear. Fixing those patterns is how you keep the IRS from escalating again.

Build a Plan You Can Maintain

A payment plan that looks good on paper but does not fit your real cash flow is a recipe for another levy. We focus on sustainable solutions, supported by documentation, so you can stay on track even when life gets messy.

Why Frazier Law Is Different for IRS Collection Defense

IRS levy cases are not just legal. They are financial, procedural, and strategic. Frazier Law is built for that reality. Charles R. Frazier’s background as a former IRS agent and his advanced tax law training bring insight into how IRS collection works from the inside, including how revenue officers and Automated Collection System personnel evaluate risk and decide when to escalate. Rick Miller’s CPA perspective strengthens the financial analysis that drives outcomes in installment agreements, hardship claims, and settlement proposals.

Just as important, the firm’s multi state practice and federal authority means you can work with a team that handles federal tax matters across the country, not only in one city or one courthouse.

When to Call a Lawyer About an IRS Bank Levy

You should consider getting help as soon as any of the following happens:

• Your bank says your account is frozen due to an IRS levy.
• You receive a final notice of intent to levy, especially an LT11 or Letter 1058, and you are unsure what to do next.
• You are in a payment plan but cannot make the next payment, or you fear you will default.
• You have unfiled returns, and you are worried the IRS will escalate.
• Your business is behind on payroll taxes or has received visits or calls from an IRS revenue officer.

You do not have to guess your way through this. The consequences of guessing can be immediate and expensive.

Talk to Frazier Law About Stopping an IRS Bank Levy

If you are dealing with an IRS bank levy, time matters. The 21 day bank holding period can be your best opportunity to stop the transfer of funds and push the case toward a controlled resolution. Even if the levy has already hit, there may still be options to pursue a release, reduce the damage, and prevent additional enforcement.

Frazier Law can help you take the next step with a clear plan. Led by attorney Charles R. Frazier and CPA Rick Miller, our team focuses on practical, detail driven IRS defense, from urgent levy response to long term solutions like installment agreements, hardship relief, appeals, and settlement strategies. Contact Frazier Law to discuss your situation and start moving from crisis to control.