What the levy does and why speed matters
A federal tax levy is an administrative action the IRS uses to collect unpaid taxes. When the IRS issues a Notice of Levy to your bank, the bank typically freezes the account and may be required to remit levy proceeds to the IRS. That can block payroll direct deposits, bill payments, and everyday access to cash. Acting quickly — within days of receiving notice or learning of the levy — gives you more options to limit the damage and recover exempt funds.
How levies start (the basic IRS process)
The IRS must generally send a Notice of Intent to Levy at least 30 days before it levies property. Common notices include LT11 or CP504 (check the letter you received). The notice explains the tax period, amount due, and your right to a hearing. If you do not resolve the debt, the IRS may send a Notice of Levy to your bank. For more on how the IRS collection process works, see the IRS Collection Process page.
Three immediate actions to take
1) Read every IRS notice and note the deadline. Notices include a phone number and contact name or office. Missing a deadline limits your options.
2) Contact your bank. Ask whether the bank received a Notice of Levy, whether funds are being held, the date the bank will remit, and whether any deposits are exempt (examples: certain Social Security, veteran’s benefits, or unemployment may be fully or partially exempt).
3) Call the IRS collection phone number on the notice. Explain you want to resolve the levy. Take careful notes: representative name, badge number, date/time, and the steps they describe.
Ways to get a levy released
Pay in full
- What it is: Pay the full balance (tax, penalties, interest).
- Effect: The IRS will release the levy after it processes payment. Processing and bank release can take several business days to a few weeks depending on bank and IRS processing flows.
- How to pay: Online at IRS.gov, by phone, or by check/money order. Keep proof of payment.
Set up an installment agreement (IA)
- What it is: A monthly payment plan approved by the IRS (Form 9465 is the traditional request form; the IRS also supports online applications).
- Eligibility: Streamlined installment agreements are often available when your total liability (tax, penalties, interest) is under a threshold and you have filed required returns. As of recent IRS guidance, taxpayers owing smaller balances may qualify for up to 72 months. Confirm current thresholds and online options at the IRS payment plans page.
- Levy release: The IRS may release a bank levy when an IA is approved and you start making payments. In many cases the IRS asks for several on-time payments before releasing the levy — call to request an immediate release once the agreement is approved.
Offer in Compromise (OIC)
- What it is: A negotiated settlement that lets you pay less than the full tax liability when the IRS agrees you cannot reasonably pay the full amount.
- How to apply: File Form 656 with supporting financial documentation and the application fee unless you qualify for a waiver.
- Levy release: The IRS generally will not release a levy solely because you submitted an OIC. However, if the OIC is accepted the levy will be released. There are rare cases where the IRS may negotiate a short-term hold or partial release while an OIC is being considered.
Currently Not Collectible (CNC) status
- What it is: The IRS temporarily suspends collection activity when you can’t pay basic living expenses.
- How to apply: Provide a completed Collection Information Statement (Form 433-A for individuals, Form 433-F in some cases) documenting income, expenses, assets, and liabilities.
- Levy release: If the IRS agrees you are CNC, it will release the levy, although the tax debt remains and can be reexamined if your finances improve.
Dispute the liability or request a Collection Due Process (CDP) hearing
- What it is: If you believe the IRS is wrong (wrong amount, wrong taxpayer, or you never received required notices), you can dispute the levy. If you received a Notice of Intent to Levy (an LT11/CP504), you generally have 30 days to request a Collection Due Process hearing using Form 12153.
- Levy release: Filing a timely CDP request can stop collection actions while the appeal is pending. If the IRS finds it levied the wrong taxpayer or misapplied a payment, it may return seized funds.
Request a hardship release
- What it is: Even if you don’t qualify for CNC, you can ask the IRS to release a levy when it creates an immediate economic hardship (e.g., it prevents you from paying rent or utilities).
- How to request: Call the number on the notice, explain the hardship, and be ready to provide documentation. The IRS exercises discretion and may grant a short-term release to allow you to restore essential living expenses.
If the IRS already collected funds from your account
- If the IRS already received funds from your bank, those funds will be applied to the tax debt. If you believe exempt income (Social Security, VA, etc.) was seized, raise that immediately with the IRS and your bank. You may be entitled to a return of exempt funds; in some cases a written claim (for example, IRS Form 843) or a CDP appeal may be used to pursue refunds. Keep records of all communications and bank statements.
What to expect for timing
- Bank actions and IRS processing mean release is rarely instantaneous. After the IRS approves a release it must notify the bank. Plan for several business days to a few weeks for funds to be made accessible again, though timing varies by bank and local IRS office.
Documentation checklist (what to have ready when you call)
- IRS notice (LT11, CP504, or similar)
- Recent bank statements showing frozen funds and dates
- Pay stubs, Social Security/benefit award letters, or proof of other income
- Monthly bills (rent/mortgage, utilities, insurance)
- Completed forms if applicable (Form 9465 for installment agreements, Form 433-A/F for CNC, Form 656 for OIC, Form 12153 for CDP)
When to hire help
- If the IRS levy is large, if you are unsure of your eligibility for CNC or OIC, if the levy involves misapplied payments, or if you prefer professional representation, a tax attorney, CPA, or enrolled agent can represent you before the IRS. These professionals know collection rules, can negotiate on your behalf, and may speed up resolution.
Common mistakes to avoid
- Don’t ignore notices: Each notice contains deadlines and rights to appeal.
- Don’t assume the levy is permanent: Often levies are reversible through payment, agreement, or demonstration of hardship.
- Don’t furnish incomplete financial statements: Missing or inaccurate information delays consideration for CNC or OIC.
- Don’t rely on informal promises: Get any IRS agreement in writing and keep copies.
Useful FinHelp internal resources
- How to stop a bank levy? — https://finhelp.io/glossary/how-to-stop-a-bank-levy/
- LT11 Notice: Intent to Levy — https://finhelp.io/glossary/lt11-notice-intent-to-levy/
- Setting Up an IRS Installment Agreement — https://finhelp.io/glossary/setting-up-an-irs-installment-agreement/
- Offer in Compromise process — https://finhelp.io/glossary/form-656-offer-in-compromise/
- Levy Release — https://finhelp.io/glossary/levy-release-2/
Authoritative external resource
- IRS Collection Process (overview of notices, levies, and collection tools): https://www.irs.gov/businesses/small-businesses-self-employed/collection-process
Bottom line
A bank levy is serious but resolvable in most cases. Identify the notice, contact your bank and the IRS immediately, and choose the correct remedy — pay, arrange a plan, apply for CNC or OIC, or dispute the liability. Keep careful records, meet deadlines, and consider professional help for complex situations.