A levy is a seizure of taxpayer property by the Internal Revenue Service to pay taxes owed. Taking money from a taxpayer's bank account is just one form of collection action, and the IRS can continue to pursue you until either the tax is paid or the statute of limitations (10 years) expires. Understanding the levy process and requirements for implementing a levy can prevent you from watching the hard earned proceeds of your bank account be handed over to the IRS.
If you do not pay or make arrangements to pay your tax owed, then the IRS could issue a levy on your bank account. If the IRS levies your account, all the funds available will be forwarded to the IRS and applied to the tax you owe. None of the deposits made to the bank after the levy is issued will go toward your tax debt. Unlike levies on wages, levies on bank accounts are not recurring.
Before the IRS can levy your bank account, they must first mail you a Demand for Payment notice. If you do not respond to the notice by paying the tax or making arrangements to pay, then the IRS is required to mail you an Intent to Levy notice. The Intent to Levy notice must arrive at least 30 days prior to the date that the levy is issued so that you have time dispute the validity or accuracy of the levy. The IRS is required by law to mail the certified levy notice to your home, your last known address or your place of business.
Once the IRS issues a bank levy, the bank must hold all funds for 21 days. This will provide you with some time to contest ownership of the bank account. If you have questions during this period, you can call the number of the IRS collection officer which is listed on your Intent to Levy Notice.
If you disagree with the accuracy or validity of the levy, you can file an appeal with the IRS Office of Appeals by completing IRS Form 12153 within 30 days of the date on the notice. In addition, if the levy causes you a financial hardship, you can call the Taxpayer Advocate Service at 877-777-4778 to request that an advocate be assigned to you.
Even if the IRS has levied your bank account, this still does not preclude them from levying other assets belonging to you. The IRS reserves the right to take enforcement action against you until the debt you owe is paid in full. If you do not have the money to pay back taxes in full, you should consider setting up an installment agreement by completing IRS Form 9465 and mailing it to the IRS office which services your area. If the agreement is accepted, you will be allowed to make monthly payments on your tax debt until it is paid in full and the IRS cannot take enforcement action during the period which you are in repayment.