Immediate steps to protect your refund

Receiving a Notice of Intent to Levy is stressful, but the clock starts when the notice is mailed. Most levy notices give you 30 days to act to stop collection or request an appeal. Responding quickly and following the right process are the most effective ways to protect a pending or upcoming federal tax refund.

  • Confirm the notice is legitimate. Scammers impersonate the IRS; real IRS notices come by mail. Never give personal information in response to an unsolicited call or email. For guidance, see IRS guidance on levies (IRS: “What to Do If the IRS Notifies You of a Levy” — https://www.irs.gov/newsroom/what-to-do-if-the-irs-notifies-you-of-a-levy).
  • Read the notice carefully. It will identify the tax period, the amount owed, and the deadline to act (commonly 30 days to request a hearing). The notice also explains appeal rights and contact information.
  • Check for pending tax refunds or anticipated refunds. If you’ve filed a return and expect a refund, that refund can be applied to unpaid federal tax through the Treasury Offset Program (TOP). See the Treasury Offset Program (https://fiscal.treasury.gov/services/treasury-offset-program/) for details on offset timing.

How the IRS intercepts refunds

The IRS uses the Treasury Offset Program to collect delinquent federal and state debts by reducing refunds and certain federal payments. That means an offset will apply to your refund automatically if you owe a qualifying debt. Understanding this helps prioritize immediate next steps. (Treasury Offset Program — https://fiscal.treasury.gov/services/treasury-offset-program/).

Legal rights and the 30‑day window

Most Notice of Intent to Levy letters inform you of your right to a Collection Due Process (CDP) hearing or an equivalent appeal. To protect a refund, you typically must request the hearing within 30 days of the date on the notice by filing Form 12153 (Request for a Collection Due Process or Equivalent Hearing). Filing Form 12153 preserves CDP rights and can stop collection while the hearing is pending if the hearing is timely requested. (IRS: Collection Due Process — https://www.irs.gov/appeals/collection-due-process-rights).

In my practice, the single most common client error is missing this 30‑day deadline. If you miss it, you often lose the automatic stay on collection and must pursue other, slower remedies.

Practical actions you can take (step‑by‑step)

  1. Verify the debt and the notice: Confirm the tax year(s) and balancing entries. Mistakes happen; sometimes the IRS attributes payments incorrectly.
  2. Call the number on the notice: If you can pay immediately or set up a short-term arrangement, the IRS may agree to hold off on levy action while you finalize payment. Keep written records of all calls.
  3. File Form 12153 within the deadline: This formally requests a CDP hearing and can prevent the IRS from taking levy action during appeal. Attach any documentation that supports your challenge (amended returns, proof of payment, identity theft paperwork).
  4. Ask about a Collection Alternative: Propose an installment agreement, request currently not collectible (CNC) status, or explore an Offer in Compromise (OIC) if you meet eligibility standards. Each option has rules and documentation requirements; CNC and installment agreements are commonly used to protect refunds while resolving balances.
  5. Request a refund holdback or levy release if funds are exempt: Certain funds are protected (for example, qualified retirement accounts in some circumstances). If the levy or offset is erroneous, you can request a levy release. See our guide on Notice of Intent to Levy: How to Protect Bank Accounts and Retirement Assets for asset‑specific steps.

When an immediate bank or refund levy occurs

If the IRS already issued a levy to a payer (the Treasury Offset Program) or to your bank, the relief options change slightly:

  • For a refund offset: Contact the Bureau of the Fiscal Service (Treasury Offset Program) and the IRS collections unit — you may need to resolve the underlying debt or negotiate a plan before the offset completes.
  • For a bank levy: Some emergency remedies include filing for a levy release with the IRS if the levy creates a financial hardship or is based on incorrect identity or incorrect tax assessment. Our emergency checklist explains steps and sample language to use when contacting your bank or the IRS: Emergency Checklist to Stop or Reverse an IRS Bank Levy.

Common strategies that work in practice

  • Installment agreements: Setting up a direct debit installment agreement demonstrates willingness to pay and often prevents further collection while the plan is in effect. There are short-term and long-term options.
  • Currently Not Collectible (CNC) status: If you can show financial hardship (basic living expenses exceed income), the IRS may place your account in CNC, pausing levy actions temporarily.
  • Offer in Compromise (OIC): In limited cases where you cannot pay the full amount, an OIC can settle the liability for less than the full balance. OICs require thorough documentation and strict rules (IRS: Offer in Compromise — https://www.irs.gov/payments/offer-in-compromise).
  • Collection Due Process hearing: A successful CDP hearing can result in a levy release, a modified repayment plan, or a finding that the levy should not proceed.

Documentation checklist (what to gather before you call or appeal)

  • Copy of the IRS notice and any earlier notices.
  • Proof of filing and proof of payments for the tax year listed.
  • Bank statements showing the expected refund deposit.
  • Pay stubs and a budget worksheet to document hardship.
  • Copies of Form 12153 (if filing for CDP) and any supporting documents.

What not to do

  • Do not ignore the notice. Lack of response removes appeal options and often leads to imminent collection.
  • Do not assume bankruptcy will always protect a refund. Bankruptcy can stay IRS actions, but tax debts have complex bankruptcy rules; consult a bankruptcy attorney before relying on that strategy.
  • Do not rely on third‑party promises without documentation. If you hire a tax professional or representative, get written engagement terms and power of attorney (Form 2848) to ensure they can represent you to the IRS.

If you miss the 30‑day deadline

Missing the CDP window complicates matters but does not leave you without options. You can still request a Collection Appeal (equivalent hearing), ask for a levy release based on hardship, propose an installment agreement, or negotiate an Offer in Compromise. Use our practical templates for responses to a notice for guidance: Responding to a Notice of Intent to Levy: Immediate Steps.

Timing and what to expect after you act

  • If you file a timely Form 12153, the IRS or IRS Appeals will notify you of hearing dates and may issue a temporary hold on collection actions while the CDP is processed. Processing times vary.
  • If you enter an installment agreement, expect the agreement to end offset activity as long as you remain current.
  • If you can’t reach agreement quickly, your refund may still be offset under TOP. That is why acting before the refund posts is critical.

Cost and professional help

Engaging a tax professional (CPA, enrolled agent, or tax attorney) can speed resolution and reduce costly mistakes. In my practice, clients who retain representation often preserve refunds more frequently because we prepare targeted paperwork, meet deadlines, and negotiate with collections officers. Expect hourly or flat fees; always get a written fee agreement.

Sample short script for contacting the IRS (keep this in your notes)

“Hello, I received Notice [notice number] dated [date]. I need to confirm the amount and request options to prevent a pending refund offset. I would like to file Form 12153 for a Collection Due Process hearing. Please tell me where to send documentation and the deadline.”

Authoritative sources and further reading

Professional disclaimer

This article is educational and not legal or tax advice. Rules change and individual circumstances vary. Consult a licensed tax professional (CPA, enrolled agent, or tax attorney) before making decisions that affect your tax obligations.

Closing practical recommendation

Act immediately. In most of my cases where clients preserved refunds, the decisive step was filing the CDP request or setting up a short‑term payment arrangement within the notice deadline. Proactive documentation, timely appeals, and realistic collection proposals are the best defenses against a refund being taken by the IRS.