How to Stop or Remove an IRS Levy on Your Bank Account

What Is an IRS Bank Levy?

An IRS bank levy is a drastic measure the Internal Revenue Service uses to collect back taxes when other attempts at collection—including notices and installment offers—have failed. Unlike a tax lien, which is just a legal claim against your property, a levy is a legal seizure: the IRS freezes your bank account and, after a short waiting period, takes the money to cover your tax bill.

• 1. The IRS sends an official “Notice of Intent to Levy” to the taxpayer and the bank.
• 2. The bank is required by law to freeze the funds in your account for 21 days.
• 3. After 21 days, if the levy remains unresolved, the bank releases the money to the IRS.
• 4. This process can repeat until your tax debt is satisfied.

The suddenness and severity of this process are why many analysts liken a bank levy to a “silent assassin”—it can wipe out your account balance with little warning if you ignore IRS communication.

Why the IRS Levies Your Bank Account

An IRS bank levy typically results from a significant or delinquent tax debt that has not been resolved through voluntary payment or negotiation. The IRS, as a federal agency, has the authority to enforce a levy after:

• 1. Mailing multiple notices demanding payment
• 2. Sending a formal Notice of Intent to Levy (with a 30-day warning window)
• 3. Giving you the opportunity to request an appeal or a payment plan

Common scenarios that can trigger a levy include:

• 1. Years of unfiled tax returns
• 2. Large balances of unpaid federal taxes
• 3. Defaulted payment agreements with the IRS
• 4. Inaction or unresponsiveness to IRS correspondence

The 21-Day Rule: Your Critical Window to Act

Upon receiving a Notice of Levy, the bank puts a hold on the available funds for 21 days. This “grace period” is designed to give you time to:

• Confirm the debt is legitimate (and not the result of error or fraud)
• Negotiate with the IRS to resolve the debt or stop the levy
• Explore legal defenses or alternative payment arrangements

During these 21 days, you cannot access the frozen funds, and neither can the IRS. If you take no action, the money will be sent directly to pay your taxes. Acting promptly during this window is your best chance to prevent the loss of your funds.

Steps to Stop or Remove an IRS Bank Levy

1. Verify the Legitimacy of the Levy

• Review all IRS letters and your financial records.
• Confirm that the bank account named in the levy belongs to you and that the debt is valid.
• If there’s a mistake—such as identity theft or misapplied payments—contact the IRS immediately to dispute the levy and recover lost funds.

2. Contact the IRS Directly

Don’t delay—calling the IRS right away opens up the possibility to negotiate a more manageable resolution, such as:

• Agreeing to a monthly payment (installment agreement)
• Presenting a case for hardship or special circumstances
• Requesting a temporary hold on collections while your case is reviewed

3. Negotiate an Installment Agreement

One of the most common ways to halt an IRS bank levy is to propose a monthly payment plan. The IRS may agree to release the levy if:

• You commit to paying a fixed amount each month until the debt is satisfied
• You file all outstanding tax returns and stay current on future obligations

A formalized IRS installment agreement requires paperwork but typically leads to the swift lifting of active levies.

4. File for an Offer in Compromise

For those who genuinely cannot pay their full debt, the IRS provides an “Offer in Compromise” program—an agreement to pay less than you owe as a final settlement. While acceptance rates are low and strict financial documentation is required, an accepted offer can immediately stop current collection activities, including levies.

5. Claim Financial Hardship (“Currently Not Collectible”)

If paying the levy would cause undue hardship—preventing you from meeting basic needs like housing, food, or medical care—you can request that your account be classified as “currently not collectible.” Provide proof (such as pay stubs, expense records, and a hardship letter). While this doesn’t erase the debt, it stops collections while your circumstances are reassessed.

6. Seek Penalty Abatement or Reduction

If the levy results from penalties—such as late filing or payment—you can request “penalty abatement.” If you have a good reason (e.g., illness, natural disaster), the IRS may remove or reduce some penalties, shrinking your overall bill and possibly ending the need for the levy.

7. Challenge the Levy at a Collection Due Process (CDP) Hearing

After a Notice of Intent to Levy, you can submit IRS Form 12153 to request a Collection Due Process Hearing. This:

• Stops all collection activity while your appeal is reviewed.
• Gives you about 30 days of additional negotiation and resolution time.
• Lets you raise defenses including incorrect assessment, prior payment, or eligibility for alternative solutions.

Legal representation is strongly recommended for CDP hearings.

8. Explore Bankruptcy as a Solution

Filing for bankruptcy is a last-resort measure, but in some cases, it can provide immediate relief from IRS bank levies. Bankruptcy courts impose an “automatic stay” prohibiting creditors (including the IRS) from collecting while debts are reviewed. However, not all tax debts are dischargeable, and bankruptcy will have long-term impacts on your credit.

Alternative Options to Negotiate With the IRS

• Installment Agreement: Initiate a monthly payment plan to spread out the tax liability.
• Debt Settlement: Negotiate to resolve your total debt for less than the full amount owed, often through legal assistance.
• Hardship Plan: Submit a hardship letter, explaining how the levy endangers your ability to survive financially.
• Penalty Abatement: Argue for elimination or reduction of IRS penalties based on “reasonable cause.”

Immediate Response Strategies

• Submit Form 12153 to request a CDP Hearing, pausing collections.
• Contact the IRS to open negotiations or propose a payment plan.
• Gather all financial documents and proof of hardship to support your case.

You don’t have to face this process alone—experienced tax professionals, such as attorneys or certified public accountants, can navigate IRS rules and negotiation tactics on your behalf.

The Importance of Legal Help

IRS collection procedures—and the appeal options available—are complex and intimidating. Engaging a tax attorney or enrolled agent gives you:

• Expertise in assessing your case and identifying the right IRS programs to leverage
• Guidance in assembling financial documentation and filing necessary forms
• Direct advocacy with IRS representatives during negotiations and hearings
• Improved likelihood of stopping or lifting the levy—often faster and with better terms

Hiring professional representation is especially important if your financial situation is already precarious or your case involves large debts or multiple years.

What Happens After a Levy Is Released?

Once the IRS agrees to lift or release an active bank levy:

• Your bank account is unfrozen, and any remaining funds are returned to your full control.
• The IRS will expect you to stay compliant with new agreements (e.g., installment schedule or Offer in Compromise).
• Failure to comply can result in the IRS reinstating the levy or pursuing other collection actions.

Stay proactive by meeting all filing, payment, and communication deadlines with the IRS going forward.

Preventing Future Levies: Proactive Habits for Taxpayers

• File taxes on time—even if you can’t pay the full amount.
• Respond to all IRS notices promptly to prevent escalation.
• Maintain complete, organized financial records.
• Seek professional help the moment tax trouble arises.
• Explore IRS payment plans or settlements early to keep accounts in good standing.

Adopting these best practices lowers your risk of facing an IRS bank levy again and helps safeguard your long-term financial stability.

Conclusion: Take Action, Regain Control

An IRS bank levy is an immediate threat to your financial health—but it is not the end of the road. By understanding your rights and acting quickly through the proper legal and negotiation channels, you can often stop, remove, or even prevent a levy. Whether through payment arrangements, hardship applications, or legal appeals, help is available.

Don’t wait until your bank account is frozen—contact a specialized tax attorney or tax relief professional for a strategy session as soon as you receive any indication of IRS levy action. With the right guidance and assertive action, you can restore your financial footing and move forward with confidence.