Overview

A bank levy is an aggressive collection tool the IRS uses to collect unpaid taxes by seizing funds in your bank account. Time is critical: once your bank receives the levy notice it will freeze the account and may eventually turn funds over to the IRS. Many taxpayers can avoid or reduce harm by following targeted emergency steps below. For official guidance, see IRS Publication 594: The Collection Process (irs.gov).

Immediate emergency steps (first 24–72 hours)

  • Call the IRS using the phone number on the levy notice or contact the IRS collections number listed at https://www.irs.gov. Use the notice ID and your SSN or EIN when you call.
  • Contact your bank immediately. Ask whether the funds are frozen, the date the bank received the levy, and when it will surrender funds. Banks commonly hold levied funds for a short statutory period before remitting them to the IRS.
  • Gather documentation that shows money in the account is exempt from levy (for example, Social Security, SSI, VA benefits, or certain unemployment payments). Provide this to the bank and the IRS quickly.

Paths to stop or reverse a levy

1) Request a levy release for financial hardship

  • If the levy creates an economic hardship (you can’t pay basic living expenses), the IRS may release the levy. To make this case, you’ll typically submit a current financial statement (Form 433-F or the longer Form 433-A) showing income, expenses, and assets. The IRS will evaluate whether collection will cause undue hardship (see IRS Publication 594).

2) Request a Collection Due Process (CDP) or equivalent hearing

  • If you received a Final Notice of Intent to Levy and Notice of Your Right to a Hearing, you generally have 30 days to file Form 12153 (Request for a Collection Due Process or Equivalent Hearing). A timely request can stop the levy while the hearing is pending. (IRS guidance: Publication 594 and IRS notices.)

3) Put the account in an Installment Agreement or Offer in Compromise

  • Setting up a direct installment agreement (or applying for an Offer in Compromise using Form 656 if eligible) can often stop collection actions, including levies, once approved. Be prepared to supply a Collection Information Statement (Form 433 series).

4) Prove the levy was issued in error or identify exempt funds

  • If the IRS levied the wrong account or the funds are exempt, you can request immediate release. Provide bank statements, benefit statements, or other proof. If funds were already seized in error, you can request a refund from the IRS and follow procedures in Publication 594.

5) File bankruptcy or consult a bankruptcy attorney

  • Filing for bankruptcy usually triggers an automatic stay that halts most collection actions, but tax treatment in bankruptcy is complex. If you’re considering bankruptcy, speak with a bankruptcy attorney immediately — timing matters.

6) Engage a qualified authorized representative

  • A CPA, enrolled agent, or tax attorney can file Form 2848 (Power of Attorney) and represent you in communications and hearings. In my practice, quick engagement of a representative often prevents funds from being surrendered while paperwork is completed.

If funds have already been seized

  • Ask the IRS for a refund or an abatement if the levy was improper or created undue hardship. Document all communications and keep copies of bank statements. You can also ask the IRS to apply seized funds to a current installment agreement or other resolution.

Common mistakes to avoid

  • Don’t ignore IRS notices — silence typically makes matters worse.
  • Don’t assume bankruptcy automatically returns seized funds without legal steps.
  • Don’t rely solely on verbal promises; get releases or agreements in writing.

Useful forms and references

Internal resources

When to get professional help

If you can’t resolve the levy within 24–72 hours, or if a significant balance has already been seized, consult a tax attorney, enrolled agent, or CPA promptly. In my 15 years working with clients in levy situations, early professional involvement often preserves access to funds and shortens resolution time.

Disclaimer

This article is educational only and not legal or tax advice. Specific situations vary — consult a qualified tax professional or attorney for personalized guidance.