What Are the Steps for Freezing or Releasing a Tax Levy?

A tax levy is one of the IRS’s most powerful collection tools: it seizes assets (bank accounts, wages, or certain property) to satisfy unpaid taxes. Freezing or releasing a levy doesn’t erase the underlying tax debt, but it stops the immediate seizure or restores access to assets while you pursue resolution. Below is a practical, prioritized checklist I use when helping clients who face a levy.

Step 0 — Read the IRS notices and identify deadlines

  • Carefully read the notice(s) you received. The IRS typically issues a “Notice of Intent to Levy” (often a CP504/Final Notice) before actually levying assets. That notice explains deadlines and how to appeal. (See IRS guidance on levies: https://www.irs.gov/payments/levy.)
  • Missing the 30-day deadline to request a Collection Due Process (CDP) hearing (Form 12153) limits your appeal rights. You can find Form 12153 and instructions at the IRS site: https://www.irs.gov/forms-pubs/about-form-12153.

Step 1 — Take immediate, protective actions (first 24–72 hours)

  • Confirm whether the levy is planned or already served. If you got a notice of intent to levy but the IRS hasn’t yet sent the levy to a bank or employer, you have more options.
  • If the levy has already hit a bank account, notify your bank immediately. Banks often freeze the levied amount for a short period; you may be able to withdraw exempt funds (payroll, certain federal benefits) or request the bank hold the funds while you pursue a release. For bank-specific steps, see our guide on how to release a federal tax levy on your bank account.
  • For wage levies, provide your employer with documentation of exempt income and contact the IRS to request a release for hardship or to arrange a payroll allocation. Our article on stopping a wage levy explains protective steps employers and employees can take.

Step 2 — Request a Collection Due Process (CDP) hearing (use Form 12153) if eligible

  • Filing Form 12153 within 30 days of the notice preserves your right to a CDP hearing with the IRS Office of Appeals. A timely CDP request generally stays collection activity while Appeals considers your case. (IRS: Collection Due Process (CDP) hearing: https://www.irs.gov/appeals/collection-due-process-cdp-hearing.)
  • A CDP hearing is usually the fastest formal route to freeze an intended levy and to present alternatives such as an installment agreement, Offer in Compromise (OIC), or innocent spouse relief.

Step 3 — Demonstrate economic hardship if applicable

  • The IRS can release a levy if it creates an immediate economic hardship — for example, if it prevents you from meeting basic living expenses (rent, utilities, food, medical). To support a hardship release you’ll need a detailed budget and documentation: recent bank statements, pay stubs, proof of recurring bills, and any unusual expenses (medical bills, dependent care).
  • Use IRS Forms 433-A/433-F (Collection Information Statement) to report income, assets, and living expenses. These forms are often required when negotiating installment agreements or when requesting a hardship release.

Step 4 — Propose an alternative the IRS accepts (installment agreement or OIC)

  • Installment agreement: Establishing and maintaining an approved installment agreement will usually result in a levy release. Consider the streamlined and partial-payment options; look at our guide on choosing between an installment agreement and an Offer in Compromise for help deciding which fits your situation.
  • Offer in Compromise (OIC): If you can reasonably show you cannot pay the full amount, an accepted OIC can both resolve the debt and remove the levy. OIC applications require a complete financial package and often take months to process.

Step 5 — Submit paperwork and follow up consistently

  • Send required forms and documentation by the method specified (certified mail if you need proof of delivery). Keep organized copies of everything you submit.
  • Follow up with the IRS revenue officer, the assigned collection employee, or Appeals. In my experience, timely follow-up (phone and written confirmation) reduces processing delays and the risk of banks remitting levied funds to the IRS.

Step 6 — If the IRS error caused the levy, request immediate release

  • The IRS must release a levy if it was issued in error, if you filed for bankruptcy, or if the tax is legally unenforceable. If you believe the levy resulted from an error (wrong SSN, already paid tax, or identity theft), provide proof and request immediate release. Document everything and escalate to Appeals if initial collection contacts do not resolve it.

Typical documents you will need

  • Notice of Intent to Levy and related IRS letters.
  • Recent bank statements (last 3–6 months).
  • Pay stubs or employer verification of income.
  • Proof of recurring household expenses (rent/mortgage, utilities, insurance, child support).
  • Medical bills or other extraordinary expenses (if claiming hardship).
  • Completed financial forms (IRS Form 433-A, 433-F or applicable business equivalent).
  • If applying, Form 656 (Offer in Compromise) and required fee/documentation.

Timelines you should expect

  • Requesting a CDP hearing: file within 30 days of the notice to preserve appeal rights. A CDP request typically stays collection while Appeals works the case.
  • Levy release for hardship: timing varies — from a few days (if contact is immediate and documentation clear) to several weeks while the IRS verifies information.
  • Offer in Compromise review: usually several months; some complex packages can take 6 months or more.

Real-world examples (illustrative)

  • Emergency hardship: A client with a bank levy and unpaid medical bills collected detailed expense evidence and a completed Form 433-F. The levy was released within a week while we set up an installment agreement to address the remaining balance.
  • Business cashflow interruption: For a small-business owner facing a levy on the business account, opening immediate dialogue with the IRS revenue officer and proposing a short-term payment plan prevented further seizures and allowed the business to resume operations.

Common mistakes to avoid

  • Waiting to respond: Missing the 30-day CDP deadline or ignoring notices removes key appeal rights.
  • Sending incomplete documentation: Partial or inconsistent financial statements slow processing and reduce chances of a hardship release.
  • Assuming a release cancels the debt: A release restores access to assets but the tax liability still exists and accrues interest and penalties until resolved.

FAQs — short answers

  • Can I stop a levy once it starts? Yes—often, with a timely CDP request, proof of hardship, or an approved payment plan or OIC. Immediate action matters.
  • Will the IRS return funds already taken by a bank? Funds already forwarded to the IRS are harder to recover; sometimes refunds are issued if the levy was wrongful, but recovery can be lengthy.
  • Does a released levy mean the IRS forgiven the tax? No, release only lifts seizure action; the tax remains due unless resolved by payment, OIC, or other remedies.

Professional tips from practice

  • Assemble a one-page “snapshot” of your financial situation (income, essential expenses, immediate cash needs) to hand to the revenue officer — clarity speeds decisions.
  • If you have multiple IRS notices or debts, centralize communications and use certified mail for critical documents.
  • Consider retaining a tax professional or attorney for complex cases — they know the forms, local revenue officers, and Appeals protocols.

Authoritative sources and further reading

For practical, situation-specific next steps, see our related FinHelp pieces: how to release a federal tax levy on your bank account, options for stopping a wage levy, and guidance on choosing an installment agreement or Offer in Compromise.

Disclaimer

This article is educational and does not constitute tax, legal, or financial advice. For guidance tailored to your exact circumstances, consult a qualified tax professional, enrolled agent, or tax attorney. Procedures and IRS policies change; verify forms and current deadlines at IRS.gov before filing.