IRS Bank Levy | State Bank Levy & Garnishment (+/-)
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What is the holding period?

A bank must wait 21 calendar days after a levy is served before sending payment. Then, on the next business day, it must turn over the taxpayer's money. The depositor(s) can waive this waiting period. The bank will not send money that is subject to attachment or execution under judicial process. "Bank" includes credit unions, savings and loan associations, trust companies, and others described in IRC 408(n) and Treas. Reg. §301.6332–3(b).

During the holding period, a levy might be released, or the amount owed could decrease.
Note:
If the bank receives no release, it must send the payment after the holding period. No additional notice is required

Getting a bank levy released?

First, it is very difficult to get a bank levy released. Once the IRS has it's claws on guaranteed revenue they are very reluctant to release those funds. However, they will release a levy under the following conditions and a release of levy notice (form 668–D, Release of Levy/Release of Property from Levy) must be issued to the Bank:
  • The liability is satisfied by full payment, i.e., is no longer owed.
  • The statutory collection period has run out.
  • The release will facilitate collection of the amount that is owed.
  • The levy is creating an economic hardship, i.e., the levy will cause the individual to be unable to pay their necessary living expenses
  • The taxpayer makes an installment agreement, unless the agreement allows for the levy
In essence, there must be a resolution made with the IRS in order to have the levy released. The IRS may also require that all outstanding returns be filed prior to releasing a levy too.

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IRS Bank Levy

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What is a levy?


A levy is a legal seizure of property to satisfy a tax debt. If taxes are not paid (or arrangement’s made to settle the debt), the IRS may seize and sell any type of real or personal property that is owned whole or in part of the debtor. The IRS can levy wages, bank accounts, and in some extreme, rare cases could even seize individual homes.

The two most common types of levies are bank levies and wage levies.

A wage levy involves the IRS telling an employer to hold part of someones pay and send it to them instead. The amount taken varies by case but, in most cases, leaves the person with minimal income in order to meet your basic living expenses. When the IRS sends notice to the employer; the employer is required by law to comply. This type of levy will remain in place until an agreement is reached and a release of levy is obtained by the employer.

A bank levy, as the name suggests, is a seizure of money from an actual bank account. Like the wage levy, the IRS contacts the bank to inform them of the levy and the amount. This will freeze only the amount in the subject account at the time the bank receives the levy. Any funds deposited after the account has been levied will not be affected. After the bank receives the notice, the funds are frozen for 21 days before actually sent to the IRS by the bank. In this time the taxpayer can make arrangements to pay their tax debt, it may be possible to release the levy if this process is completed and appoved by the IRS before the 21 day period expires After the 21 days the money is gone and, generally, will not be returned.
  • The bank must send the amount in the taxpayer's accounts. However, it must send no more than the amount shown on the notice of levy.
  • The notice of levy only reaches the amount on deposit when the levy is received. Money deposited later is not surrendered, including deposits during the holding period. Another levy must be served to reach this money. Also, the levy only reaches deposits that have cleared and are available for the taxpayer to withdraw.
  • Levy proceeds must not be reduced by any fee charged by the bank for processing the levy.