Options for Taxpayers Facing a Bank Levy: Immediate Steps

Immediate steps to take the day you learn of a bank levy

Facing a bank levy is stressful, but the actions you take within the first 24–72 hours can determine whether money is removed, whether you preserve legal rights, and which relief options remain available. Below is a practical checklist and the reasoning behind each step.

• Read the notice carefully and note the deadline. The IRS usually sends an LT11 or similar “Notice of Intent to Levy” that gives you 30 days to request a hearing; ignore this at your peril. (IRS: “What to do if the IRS levies your bank account” — https://www.irs.gov/individuals/what-to-do-if-the-irs-levies-your-bank-account)
• Do not attempt to hide funds or transfer money to avoid the levy. That can be treated as tax evasion.
• Call the phone number on the notice immediately and confirm the amount, the date the levy was issued, and the point of contact.
• Contact your bank right away to find out whether they have already been served with the levy and whether they have frozen or will remit funds; banks often have a hold period before sending money to the IRS.
• Identify exempt funds (Social Security, SSI, veterans benefits and certain federal payments) and prepare proof (award letters, bank deposit descriptions). The IRS may be required to release exempt federal benefit funds. (IRS: https://www.irs.gov/individuals/what-to-do-if-the-irs-levies-your-bank-account)
• Gather documentation that shows true financial hardship (current bills, lease/mortgage statement, bank statements, paystubs). This will be needed if you ask the IRS to release the levy for economic hardship or to set up a payment arrangement.

Key short-term options and the correct forms to use

• Request a Collection Due Process (CDP) hearing: If you received an LT11 (or similar final notice), you generally have 30 days to file Form 12153 to request a hearing with the IRS Office of Appeals. A timely CDP request halts levy action while Appeals considers your case. (Form 12153: https://www.irs.gov/forms-pubs/about-form-12153)

• Request a temporary release for financial hardship: If the levy will prevent you from meeting basic living expenses, ask the IRS agent or Appeals officer for a levy release and put the account into Currently Not Collectible (CNC) status or negotiate a short-term delay. You’ll need clear documentation.

• Apply for an Installment Agreement: If you can pay over time, set up a payment plan. Many plans can be requested online or negotiated by phone. Useful starting links: IRS Online Payment Agreement and FinHelp guidance for negotiating installment agreements (Installment Agreement guide). (IRS: https://www.irs.gov/payments/online-payment-agreement-application)

• Consider an Offer in Compromise (OIC) only if you can show you cannot pay the full tax debt. An OIC uses Form 656 and Form 433‑A/433‑F (financial disclosure); OICs are rarely approved unless collectibility is clearly in doubt. (IRS: https://www.irs.gov/settlements/offer-in-compromise)

• Contact the Taxpayer Advocate Service (TAS) if you’re facing immediate economic harm and cannot get relief from the IRS. TAS is an independent organization within the IRS that can help expedite releases in qualifying cases (https://www.taxpayeradvocate.irs.gov/).

• If you want professional representation, file Form 2848 (Power of Attorney) so a CPA, enrolled agent, or tax attorney can represent you and communicate directly with the IRS: https://www.irs.gov/forms-pubs/about-form-2848

Note on forms in older guidance: a common mistake is to recommend Form 843 as an appeal for a levy; Form 843 is for certain claims for refund/abatement — not the primary tool to stop a levy. The correct immediate appeal route for an intent-to-levy notice is Form 12153 (CDP) or working directly with the IRS collections office.

What the bank and IRS will do — timeline and mechanics

• The IRS generally sends a Notice of Intent to Levy (LT11 or similar) with at least a 30‑day window before issuing an administrative levy on a bank account. If you miss that window and the bank has a levy in hand, the bank will typically freeze the funds and then remit them to the IRS after a set processing period.
• If you file a timely CDP hearing request (Form 12153), levy action can be stayed while the appeal is processed; however, some levies may still be enforced in narrow circumstances — speed matters.
• If you can show that the levy will cause immediate financial hardship, an IRS agent or Appeals officer may authorize a release within days if well-documented.

What funds are protected or exempt

Certain federal benefits are considered exempt from levy (examples include Social Security benefits, Supplemental Security Income (SSI), and certain veterans’ benefits). Deposits from these sources are often protected, but you must provide documentation to the bank and to the IRS. The IRS guidance on levies explains exempt funds and how to prove them (IRS: https://www.irs.gov/individuals/what-to-do-if-the-irs-levies-your-bank-account).

Be careful: payroll direct deposits and employer deposits are usually not exempt. Also, co-owned account funds (e.g., joint accounts) can be complicated — the IRS may levy the entire balance and the co-owner would need to request a release for their portion.

Practical negotiation strategies I use with clients (real-world tips)

In my practice over 15 years as a CPA/CFP, the most effective immediate actions are organized, evidence-based requests. I typically:

1. Document every deposit and expense for the last 60–90 days and create a concise hardship packet.
2. File a CDP request (Form 12153) within the 30‑day window if applicable; if the levy is already in place, call the collections number and request a “levy release for hardship” and follow up in writing.
3. Propose a reasonable installment agreement with a realistic monthly amount supported by Form 433‑F or bank statements. If the client cannot pay, prepare an OIC pre‑qualifier packet but set expectations: OICs take time and are often rejected unless the financial picture is clear.
4. If the bank has already seized funds, I prioritize recovering exempt federal benefits first and then negotiate return of non-exempt funds where possible.

When to involve the Taxpayer Advocate or file litigation

Escalate to the Taxpayer Advocate Service if the IRS won’t release a levy that’s causing economic harm, or if you can’t get timely help through regular channels. In rare cases where appeals fail, litigation in Tax Court or U.S. District Court may be necessary; consult a tax attorney for that route.

Common mistakes to avoid

• Waiting to act until the levy is enforced. Often 30 days makes all the difference.
• Filling out the wrong form (e.g., using Form 843 instead of Form 12153 for a CDP hearing).
• Assuming all bank deposits are fair game — document exempt federal payments.
• Trying to hide or move money to avoid collection — that can create criminal exposure.

Scripts and next actions (sample phone script)

If you call the IRS or collections office, keep the call short and focused. Example:

“My name is [X]. My taxpayer ID is [XXX-XX-XXXX]. I received Notice LT11 dated [date] about a levy. I want to confirm whether a levy has been served to [bank name] and request options to stop or release the levy for economic hardship. I am preparing a Form 12153 for a CDP hearing and can provide documentation immediately. Who is the assigned contact and what is the fastest way to submit hardship documents?”

Record the agent’s name, badge number, and date/time. Follow up with an email or certified mail where possible.

Related FinHelp resources

• More detail on stopping a levy: How to stop a bank levy?
• Next steps and payment options after a levy: Options for Paying Taxes After a Bank Levy Has Been Placed
• Choosing between installment agreements and other options: Installment Agreement guidance

Final points and professional disclaimer

Time matters. File a CDP (Form 12153) if you got an LT11, contact your bank and the IRS immediately, collect proof of exempt funds, and prepare a realistic repayment or settlement proposal. If you’re unsure, get help: a licensed CPA, enrolled agent, or tax attorney can file the proper forms and represent you to the IRS (use Form 2848 to authorize them).

This article is educational and does not replace personalized tax advice. For authoritative IRS guidance see: “What to do if the IRS levies your bank account” and the IRS pages on Offers in Compromise and Online Payment Agreements (links above).