Can the IRS Take Money From My Bank Account?

The IRS can indeed seize money from your bank account to cover unpaid tax debts; this is called a levy, and money-central.com is here to help you understand the process and what you can do about it. Understanding your rights and options is crucial when dealing with tax levies, and we’re committed to providing clear, actionable guidance to navigate these challenging situations. If you’re facing IRS enforcement actions, exploring strategies like tax resolution, penalty abatement, or an offer in compromise might provide relief.

1. What Triggers an IRS Bank Levy?

An IRS bank levy is a serious enforcement action, but it doesn’t happen out of the blue. It’s the culmination of a process where the IRS has tried other methods to collect unpaid taxes. Let’s break down the steps that lead to a levy.

Unpaid Tax Assessment: It all starts with an assessed tax liability. This means the IRS has determined you owe a certain amount in taxes, whether from unpaid income taxes, payroll taxes, or other types of taxes.
Notice and Demand for Payment: The IRS is required to send you a notice and demand for payment. This notice informs you of the tax due and requests that you pay it.
Failure to Pay: If you don’t pay the tax liability in full and don’t make arrangements to resolve it (such as through an installment agreement or offer in compromise), the IRS can proceed with collection actions.
Final Notice of Intent to Levy: Before levying your bank account, the IRS must send you a final notice of intent to levy. This notice is critical because it informs you that the IRS intends to seize your assets, including funds in your bank account, to satisfy the tax debt. It also informs you of your right to a hearing with the IRS Independent Office of Appeals.
Notice of Your Right to A Hearing: As part of the final notice, you have the right to request a hearing with the IRS Independent Office of Appeals. This is your opportunity to dispute the tax liability, propose alternative payment arrangements, or argue that a levy would create a significant hardship.
- According to the IRS, you must request this hearing within a certain timeframe, typically 30 days from the date of the notice. If you miss this deadline, you may lose your right to a hearing.
Levy Served on Your Bank: If you don’t respond to the final notice or if the IRS doesn’t agree with your arguments, the IRS can serve a levy on your bank. The levy requires the bank to freeze funds in your account up to the amount of the tax debt and send those funds to the IRS after a holding period, usually 21 days.

The IRS generally follows a specific process before levying a bank account:

Step	Description
Assessment of Tax Liability	The IRS determines that you owe a specific amount of taxes.
Notice and Demand for Payment	The IRS sends you a notice informing you of the tax due and requesting payment.
Final Notice of Intent to Levy	The IRS sends you a final notice stating its intent to levy your property, including your bank account, if the tax debt is not resolved. This notice also informs you of your right to a hearing with the IRS Independent Office of Appeals.
Opportunity for a Hearing	You have the right to request a hearing with the IRS Independent Office of Appeals to dispute the tax liability, propose alternative payment arrangements, or argue that a levy would create a significant hardship. This request must be made within a specific timeframe, typically 30 days from the date of the notice.
Levy Served on Bank	If you don’t respond to the final notice or if the IRS doesn’t agree with your arguments, the IRS can serve a levy on your bank. The levy requires the bank to freeze funds in your account up to the amount of the tax debt and send those funds to the IRS after a holding period, usually 21 days.
Funds Remitted to IRS	After the holding period, the bank sends the frozen funds to the IRS to satisfy your tax debt.
Continuous Levy (if applicable)	In some cases, the IRS may issue a continuous levy, which means the bank must continue to send funds to the IRS periodically until the tax debt is paid in full. This is common for wage levies, where a portion of your wages is continuously sent to the IRS. The IRS may also use continuous levies for other types of income, such as payments from customers or clients if you’re self-employed.

It’s important to note that the IRS has specific guidelines and limitations on levies. For example, the IRS generally cannot levy certain types of income or property, such as Social Security benefits or unemployment compensation.

2. What Types of Bank Accounts Can the IRS Levy?

The IRS has broad authority to levy various types of bank accounts to satisfy unpaid tax debts. Understanding which accounts are at risk can help you take proactive steps to protect your assets.

Personal Checking and Savings Accounts: These are the most common types of accounts levied by the IRS. Whether it’s your everyday checking account or a savings account you’ve been building up, the IRS can seize funds from these accounts to cover your tax debt.
Business Bank Accounts: If you own a business, the IRS can levy your business bank accounts to satisfy unpaid business taxes or personal tax liabilities. This can include accounts used for operating expenses, payroll, and other business-related transactions.
Money Market Accounts: These accounts, which typically offer higher interest rates than regular savings accounts, are also subject to levy by the IRS.
Certificates of Deposit (CDs): The IRS can levy funds held in CDs. However, there may be penalties for early withdrawal, which could reduce the amount available to the IRS.
Joint Bank Accounts: If you have a joint bank account with someone else, the IRS can levy the entire account balance, even if only one account holder owes the tax debt. This can create significant hardship for the non-liable account holder, who may need to take legal action to recover their share of the funds.
Trust Accounts: The IRS can levy trust accounts if the taxpayer has a beneficial interest in the trust. This means the taxpayer has the right to receive income or assets from the trust.
Escrow Accounts: Escrow accounts, which are often used in real estate transactions or for holding funds for a specific purpose, can also be levied by the IRS.
Foreign Bank Accounts: The IRS has the authority to levy foreign bank accounts held by U.S. taxpayers. This can be more complex, as it may involve international treaties and agreements.

The IRS can levy a wide range of bank accounts, including personal and business accounts, to satisfy unpaid tax debts.

3. What Protections Are in Place Against IRS Bank Levies?

While the IRS has broad authority to levy bank accounts, there are certain protections and limitations in place to prevent abuse and protect taxpayers from undue hardship.

Advance Notice: The IRS is required to provide you with advance notice before levying your bank account. This notice, called the Final Notice of Intent to Levy and Notice of Your Right to A Hearing, must be sent at least 30 days before the levy.
Right to a Hearing: As mentioned earlier, you have the right to request a hearing with the IRS Independent Office of Appeals after receiving the final notice. This hearing gives you an opportunity to present your case, propose alternative payment arrangements, or argue that a levy would create a significant hardship.
Exempt Property: Certain types of property are exempt from IRS levy. This means the IRS cannot seize these assets to satisfy your tax debt.
- Social Security Benefits: Social Security benefits are generally exempt from IRS levy.
- Unemployment Compensation: Unemployment benefits are also typically protected from levy.
- Certain Public Assistance Payments: Payments from certain public assistance programs, such as Temporary Assistance for Needy Families (TANF), are usually exempt.
- Workers’ Compensation: Workers’ compensation benefits are generally protected from levy.
- Certain Pension and Retirement Benefits: Some pension and retirement benefits may be exempt, depending on the specific plan and applicable laws.
- Small Amount of Personal Property: The IRS may not be able to seize a small amount of personal property, such as clothing and household items, if their value is below a certain threshold.
Hardship Relief: The IRS may release a levy if it determines that it is causing a significant economic hardship. This could include situations where the levy prevents you from paying for basic living expenses like food, housing, and medical care.
Offer in Compromise (OIC): An Offer in Compromise allows you to settle your tax debt with the IRS for a lower amount than what you originally owed. If the IRS accepts your OIC, it will release any levies on your bank accounts and other assets.
Installment Agreement: An installment agreement allows you to pay off your tax debt in monthly installments. If the IRS approves your installment agreement, it will typically release any levies on your bank accounts.
Innocent Spouse Relief: If you are being held responsible for your spouse’s tax liabilities due to errors or omissions on a joint tax return, you may be eligible for innocent spouse relief. If the IRS grants you innocent spouse relief, it will release any levies on your bank accounts related to your spouse’s tax debt.

Several protections are in place to prevent abuse and protect taxpayers, including advance notice, the right to a hearing, and exemptions for certain types of property and income.

4. What Should You Do if the IRS Levies Your Bank Account?

If the IRS levies your bank account, it’s essential to act quickly and take appropriate steps to protect your financial interests. Here’s what you should do:

Contact the IRS Immediately: Reach out to the IRS as soon as possible to discuss the levy and explore your options. You can call the IRS at the number provided on the levy notice or visit your local IRS office.
Understand Your Rights: Familiarize yourself with your rights as a taxpayer. This includes your right to a hearing, the right to request hardship relief, and the right to explore alternative payment arrangements.
Gather Documentation: Collect all relevant documents related to your tax debt and your financial situation. This may include tax returns, bank statements, pay stubs, and records of expenses.
Request a Levy Release: If the levy is causing a significant hardship, you can request a levy release from the IRS. You’ll need to provide documentation to support your claim, such as proof of income and expenses.
Explore Alternative Payment Arrangements: If you can’t pay the tax debt in full, explore alternative payment arrangements with the IRS, such as an installment agreement or an Offer in Compromise.
Consider Professional Assistance: Dealing with the IRS can be complex and overwhelming. Consider seeking assistance from a qualified tax professional, such as a tax attorney, CPA, or enrolled agent.
- These professionals can help you understand your rights, negotiate with the IRS, and explore all available options for resolving your tax debt.
- Address: 44 West Fourth Street, New York, NY 10012, United States.
- Phone: +1 (212) 998-0000.
- Website: money-central.com.
Review Bank Records: Check your bank records to determine the exact amount levied by the IRS and the date of the levy.
Determine if Funds Are Exempt: Identify if any of the funds in your bank account are exempt from levy, such as Social Security benefits or unemployment compensation. If so, notify the IRS immediately and provide documentation to support your claim.
File an Amended Tax Return (If Applicable): If you believe there was an error on your tax return that led to the tax debt, file an amended tax return to correct the mistake.
Keep Detailed Records: Maintain detailed records of all communication with the IRS, including dates, names of IRS employees, and the content of conversations.

Acting quickly, understanding your rights, and exploring all available options can help you navigate this challenging situation and protect your financial interests.

5. How Can You Prevent an IRS Bank Levy?

The best way to deal with an IRS bank levy is to prevent it from happening in the first place. Here are some proactive steps you can take to avoid a levy:

File Your Taxes on Time: Filing your taxes on time is crucial. Even if you can’t pay the full amount due, file your return to avoid penalties and interest.
Pay Your Taxes in Full: If possible, pay your taxes in full by the due date. This will prevent the IRS from taking collection actions against you.
Communicate With the IRS: If you can’t pay your taxes in full, contact the IRS as soon as possible to discuss your options. The IRS is often willing to work with taxpayers who are proactive and communicative.
Set Up a Payment Plan: If you can’t pay your taxes in full, consider setting up an installment agreement with the IRS. This allows you to pay off your tax debt in monthly installments.
Consider an Offer in Compromise (OIC): If you can’t afford to pay your tax debt in full, you may be eligible for an Offer in Compromise (OIC). This allows you to settle your tax debt with the IRS for a lower amount than what you originally owed.
Keep Accurate Records: Maintain accurate records of your income, expenses, and tax payments. This will help you file your taxes correctly and avoid errors that could lead to tax debt.
Review Your Tax Withholdings: Periodically review your tax withholdings from your paycheck to ensure that you’re withholding enough to cover your tax liability. You can adjust your withholdings by filing a new Form W-4 with your employer.
Seek Professional Advice: If you’re struggling to manage your taxes, seek professional advice from a qualified tax professional.
Monitor Your Bank Accounts: Regularly monitor your bank accounts for any unusual activity or notices from the IRS.
Respond to IRS Notices Promptly: If you receive any notices from the IRS, respond to them promptly and provide any requested information. Ignoring IRS notices can escalate the situation and lead to collection actions.

Preventive Measure	Description
File Taxes on Time	Submit your tax return by the deadline, even if you can’t pay the full amount due.
Pay Taxes in Full	Pay your tax liability in full by the due date to avoid penalties and interest.
Communicate with IRS	Contact the IRS if you can’t pay your taxes in full to discuss your options and demonstrate your willingness to resolve the debt.
Set Up Payment Plan	Establish an installment agreement with the IRS to pay off your tax debt in monthly installments.
Consider Offer in Compromise	Explore the possibility of settling your tax debt with the IRS for a lower amount than what you originally owed through an Offer in Compromise (OIC).
Keep Accurate Records	Maintain detailed records of your income, expenses, and tax payments to ensure accurate tax filing and avoid errors.
Review Tax Withholdings	Periodically review your tax withholdings from your paycheck and adjust them as needed to ensure you’re withholding enough to cover your tax liability.
Seek Professional Advice	Consult with a qualified tax professional for guidance and assistance in managing your taxes and resolving any tax issues.
Monitor Bank Accounts	Regularly check your bank accounts for any unusual activity or notices from the IRS.
Respond to IRS Notices	Promptly respond to any notices you receive from the IRS and provide any requested information to address the issue and prevent further collection actions.

By taking these proactive steps, you can significantly reduce your risk of facing an IRS bank levy and protect your financial well-being.

6. What is the Difference Between a Tax Lien and a Tax Levy?

It’s important to understand the difference between a tax lien and a tax levy, as they are two distinct collection actions the IRS can take.

Tax Lien: A tax lien is a legal claim the IRS places on your property as security for unpaid taxes. It’s like a mortgage on your assets, giving the IRS the right to seize and sell your property if you don’t pay your tax debt.
- A tax lien arises automatically when you fail to pay your tax debt after the IRS assesses it and sends you a notice and demand for payment.
- The tax lien attaches to all of your property, including real estate, vehicles, bank accounts, and other assets.
- The IRS can file a notice of federal tax lien with the county recorder’s office, which makes the lien public record. This can affect your ability to obtain credit, sell property, or refinance a mortgage.
Tax Levy: A tax levy is the actual seizure of your property to satisfy a tax debt. It’s the legal process by which the IRS takes possession of your assets to pay off your unpaid taxes.
- A tax levy can be used to seize funds from your bank account, garnish your wages, or seize and sell your real estate, vehicles, and other personal property.
- The IRS must send you a final notice of intent to levy at least 30 days before the levy, giving you an opportunity to resolve the tax debt.
- A tax levy is a more aggressive collection action than a tax lien, as it involves the actual seizure of your assets.

Feature	Tax Lien	Tax Levy
Definition	A legal claim the IRS places on your property as security for unpaid taxes.	The actual seizure of your property to satisfy a tax debt.
When it Arises	Automatically when you fail to pay your tax debt after the IRS assesses it and sends you a notice and demand for payment.	After the IRS sends you a final notice of intent to levy at least 30 days before the levy.
What it Attaches to	All of your property, including real estate, vehicles, bank accounts, and other assets.	Specific assets, such as funds in your bank account, wages, or real estate.
Public Record	The IRS can file a notice of federal tax lien with the county recorder’s office, which makes the lien public record.	No public record is created, but the levy is served on the party holding your assets (e.g., your bank or employer).
Effect	Can affect your ability to obtain credit, sell property, or refinance a mortgage.	Results in the immediate seizure of your assets to pay off your tax debt.
Aggressiveness	Less aggressive than a tax levy, as it doesn’t involve the actual seizure of your assets.	More aggressive than a tax lien, as it involves the actual seizure of your assets.

7. How Long Does an IRS Levy Last?

The duration of an IRS levy depends on the type of levy and how you resolve your tax debt. Here’s a breakdown of how long different types of levies can last:

Bank Levy: A bank levy is typically a one-time seizure of funds from your bank account. The IRS sends a notice to your bank, which freezes the funds in your account up to the amount of your tax debt. After a holding period of 21 days, the bank sends the funds to the IRS.
- The levy on your bank account is then released, but the IRS can issue another levy on your bank account or other assets if you don’t resolve your tax debt.
Wage Levy: A wage levy, also known as a wage garnishment, is a continuous levy that takes a portion of your wages each pay period until your tax debt is paid off.
- The amount that can be garnished from your wages is determined by the IRS based on your filing status and the number of dependents you claim.
- A wage levy remains in effect until you pay off your tax debt, the IRS releases the levy, or you enter into an alternative payment arrangement, such as an installment agreement or an Offer in Compromise.
Continuous Levy on Other Income: The IRS can also issue continuous levies on other types of income, such as payments from customers or clients if you’re self-employed.
- These levies work similarly to wage levies, taking a portion of your income until your tax debt is paid off.
- The duration of these levies depends on the specific circumstances and how you resolve your tax debt.

The duration of an IRS levy depends on the type of levy and how you resolve your tax debt. Bank levies are typically one-time seizures, while wage and continuous levies can last until the debt is paid off.

8. What Happens to Your Money After the IRS Levies Your Bank Account?

After the IRS levies your bank account, the bank is required to hold the funds for 21 days before sending them to the IRS. This holding period allows you time to:

Contact the IRS: Contact the IRS to discuss the levy and explore your options for resolving your tax debt.
Claim Exemptions: Claim any exemptions that apply to the funds in your account, such as Social Security benefits or unemployment compensation.
Request a Levy Release: Request a levy release if the levy is causing a significant hardship.

After the 21-day holding period, the bank sends the funds to the IRS. The IRS then applies the funds to your tax debt, including penalties and interest.

9. Can the IRS Levy Your Bank Account for State Taxes?

Generally, the IRS can only levy your bank account for federal tax debts, not for state taxes. State tax agencies have their own collection procedures and can levy your bank account to satisfy state tax debts, but they must follow their own rules and regulations.

10. What Are Some Common Mistakes to Avoid When Dealing With an IRS Levy?

Dealing with an IRS levy can be stressful and confusing, and it’s easy to make mistakes that could worsen your situation. Here are some common mistakes to avoid:

Ignoring the Levy Notice: Ignoring the levy notice is one of the worst things you can do. The notice contains important information about your rights and options, and failing to respond can lead to further collection actions.
Not Contacting the IRS: Contacting the IRS is crucial to understanding your tax debt and exploring your options for resolving it. Don’t be afraid to reach out to the IRS and ask questions.
Providing False Information: Providing false information to the IRS is a serious offense that can result in penalties and even criminal charges. Always be honest and accurate in your dealings with the IRS.
Not Seeking Professional Advice: Dealing with the IRS can be complex and overwhelming, and it’s often beneficial to seek professional advice from a qualified tax professional.
Waiting Too Long to Act: Acting quickly is essential when dealing with an IRS levy. The sooner you take action, the more options you’ll have for resolving your tax debt.
Assuming the IRS is Always Right: While the IRS has broad authority to collect taxes, they can make mistakes. Don’t assume that the IRS is always right, and be prepared to challenge their actions if necessary.
Failing to Claim Exemptions: Make sure to claim any exemptions that apply to the funds in your bank account, such as Social Security benefits or unemployment compensation.
Not Exploring Alternative Payment Arrangements: Explore all available options for resolving your tax debt, such as an installment agreement or an Offer in Compromise. Don’t assume that you have to pay the full amount immediately.
Giving Up Too Easily: Resolving a tax debt can be a long and challenging process, but don’t give up too easily. With persistence and the right approach, you can often find a way to resolve your tax debt and avoid further collection actions.

Avoiding these common mistakes can help you navigate the IRS levy process more effectively and protect your financial interests.

FAQ: Can the IRS Take Money From Bank Account

Can the IRS take money from my bank account without warning?
No, the IRS must send you a final notice of intent to levy at least 30 days before seizing funds from your bank account.
What types of income are exempt from an IRS levy?
Social Security benefits, unemployment compensation, and certain public assistance payments are generally exempt from IRS levy.
Can the IRS levy a joint bank account?
Yes, the IRS can levy a joint bank account, even if only one account holder owes the tax debt.
How can I request a levy release from the IRS?
You can request a levy release if the levy is causing a significant hardship by contacting the IRS and providing documentation to support your claim.
What is an Offer in Compromise (OIC)?
An OIC allows you to settle your tax debt with the IRS for a lower amount than what you originally owed.
How long does an IRS bank levy last?
A bank levy is typically a one-time seizure of funds, but the IRS can issue additional levies if you don’t resolve your tax debt.
Can the IRS garnish my wages?
Yes, the IRS can garnish your wages through a wage levy, which takes a portion of your wages each pay period until your tax debt is paid off.
What should I do if I receive a levy notice from the IRS?
Contact the IRS immediately, understand your rights, gather documentation, and explore alternative payment arrangements.
Can the IRS levy my bank account for state taxes?
Generally, no. The IRS can only levy your bank account for federal tax debts.
What is the difference between a tax lien and a tax levy?
A tax lien is a legal claim on your property, while a tax levy is the actual seizure of your property to satisfy a tax debt.

Navigating IRS levies can be daunting, but with the right knowledge and resources, you can protect your financial well-being. At money-central.com, we offer a wealth of articles, tools, and expert advice to help you understand your options and take control of your financial situation. Explore our website today to discover how we can assist you in resolving your tax issues and achieving financial stability.