Bank on It: Stopping an IRS Levy and Getting Your Funds Back

When the IRS Freezes Your Bank Account: Understanding Your Path to Relief

An IRS tax levy release is the formal process of stopping the IRS from seizing your assets. Here’s a quick guide on how to get one:

Quick Answer: How to Get an IRS Tax Levy Released

1. Contact the IRS immediately using the phone number on your levy notice.
2. Prove economic hardship by showing the levy prevents you from meeting basic living expenses.
3. Propose a payment alternative like an installment agreement.
4. Request a Collection Due Process hearing within 30 days of your Final Notice.
5. Appeal a denial through the Collection Appeal Program or Taxpayer Advocate Service.

An IRS levy is the legal seizure of your property—from bank accounts to wages—to satisfy a tax debt. Unlike most creditors, the IRS doesn’t need a court order. However, you have rights. The IRS must follow specific procedures and must release a levy under certain conditions. For bank levies, there’s a critical 21-day window to negotiate before funds are sent to the IRS.

Even if your initial request is denied, you have appeal options. In some cases, you can even get levied funds returned. I’m Attorney Samuel Landis, and my firm has helped countless clients secure IRS tax levy releases. We use proven strategies to resolve complex IRS issues efficiently.

The infographic above shows the path from an unpaid tax bill to an IRS levy and the multiple options for release, including payment arrangements, proving economic hardship, or filing an appeal.

First Things First: Understanding the IRS Levy and Initial Notices

An IRS levy is the legal seizure of your property to satisfy an unpaid tax debt. It’s not a warning—it’s the IRS taking action. They can garnish wages, freeze bank accounts, or seize property like your car or home. The financial impact can be devastating, but the IRS doesn’t act without warning. They are required to follow specific procedures first.

Before a levy, three things must happen:

1. The IRS assesses the tax and sends you a Notice and Demand for Payment.
2. You fail to pay the tax after receiving the notice.
3. The IRS sends a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before seizing property.

This Final Notice is your call to action. It grants you the right to request a Collection Due Process (CDP) hearing to challenge the levy and explore alternatives. Missing the 30-day window to request this hearing significantly limits your options. For a deeper dive, visit our tax levy information page. If you can’t afford to pay, see our guide on what to do if you owe the IRS but can’t pay.

What Triggers an IRS Levy?

An unresolved tax debt that you haven’t paid or made arrangements to pay triggers a levy. After the IRS assesses a tax liability and sends a Notice and Demand for Payment, ignoring it escalates the collection process. You’ll eventually receive the critical Final Notice of Intent to Levy, also called a Collection Due Process (CDP) notice. This is the last step before asset seizure. The 30-day deadline to request a hearing is strict—every day counts.

Automated vs. Manual Levy Programs

The IRS uses both automated and manual programs to collect unpaid taxes.

Automated levy programs are highly efficient. The Federal Payment Levy Program (FPLP) intercepts federal payments like tax refunds and Social Security benefits. Similar programs target state tax refunds and, for Alaska residents, Permanent Fund Dividend payments.

Manual levy programs are handled by the Automated Collection System (ACS), which targets private-sector assets. These are the levies that hit your bank account or garnish your wages. ACS levies often follow automated phone calls from the IRS. When these attempts fail, the system generates levies. A wage garnishment is particularly damaging as it continues with each paycheck until the debt is paid or you secure an IRS tax levy release. Learn more about how to stop a wage garnishment.

Mandatory Conditions for an IRS Tax Levy Release

The IRS doesn’t have unlimited power to keep a levy. Under the Internal Revenue Code (IRC 6343), they are legally required to release it in certain situations. This is your right, not a favor.

The IRS must release a levy if:

• You’ve paid the tax debt in full, including penalties and interest.
• The collection period expired before the levy was issued (typically 10 years from the assessment date, known as the CSED).
• Releasing the levy will help you pay your taxes (e.g., releasing a business asset needed to generate income).
• The levy causes economic hardship, preventing you from covering basic living expenses.
• You enter an Installment Agreement whose terms don’t allow the levy to continue.
• The value of the seized property far exceeds the debt, and releasing part of it won’t harm collection efforts.
• The levy was procedurally incorrect (e.g., improper notice) or on legally exempt property.
• The levied property doesn’t belong to you (a wrongful levy).

For more details on these conditions, see our page on More info about IRS Levy Release.

Defining ‘Economic Hardship’

Economic hardship is a common reason for an IRS tax levy release, but it’s narrowly defined. It means the levy prevents you from meeting basic, reasonable living expenses like food, housing, utilities, transportation, and essential medical care. To prove it, you must provide detailed financial information, typically on Form 433-A (Collection Information Statement). Accuracy is crucial. The IRS must release a wage levy causing immediate hardship, while they may release a bank levy. You must clearly demonstrate that you cannot afford necessities because of the levy. For official guidance, see the IRS page: What if a levy is causing a hardship?.

The Impact of Payment Agreements

Committing to a payment plan is often the fastest way to get an IRS tax levy release. It shows you’re serious about resolving your debt.

• Installment Agreement: Once the IRS accepts your proposal for monthly payments and you begin paying, they typically release the levy as it’s no longer necessary.
• Currently Not Collectible (CNC) status: If you prove you cannot afford to pay anything without suffering economic hardship, the IRS can place your account in CNC status. This pauses collections, including levies, giving you breathing room. The debt still accrues interest, and the IRS will review your finances periodically. Learn more on our page about More info about IRS Currently Not Collectible.

Payment agreements demonstrate good faith and cooperation, making the IRS far more willing to release a levy.

How-To: A Step-by-Step Guide to Requesting a Levy Release

When the IRS levies your bank account or wages, you must act quickly. For bank levies, you have a crucial 21-day window before the funds are sent to the IRS. Following a clear process can make all the difference.

Steps for a Successful IRS Tax Levy Release Request

1. Call the IRS Immediately: Use the phone number on your levy notice (or the general line at 1-800-829-1040). Before calling, gather your tax ID number, the levy notice, recent pay stubs, bank statements, and a list of monthly expenses. Also, have the fax number for your bank or employer ready, as the IRS often faxes the release form (Form 668-D).
2. Explain Your Situation Calmly: Stick to the facts and focus on one of the mandatory release conditions. If claiming economic hardship, explain specifically how the levy prevents you from paying for basic needs like rent, food, or medical care. Be prepared to provide detailed financial information, possibly on Form 433-A.
3. Propose a Solution: A levy release only stops the immediate seizure; the tax debt remains. Proposing a collection alternative improves your chances. Request an installment agreement for manageable monthly payments or ask about Currently Not Collectible status if your financial situation is dire. Learn more about this at our page on IRS Currently Not Collectible status.
4. Confirm the Release: After the IRS agrees to a release, they will issue Form 668-D or 668-E to your bank or employer. Follow up directly with your bank or employer to confirm they received the release and your funds are no longer frozen. This prevents funds from being sent to the IRS due to a communication error.

Can Levied Funds Be Returned?

Yes, you can sometimes get your money back, but only if the levy was wrongful or erroneous.

A wrongful levy occurs when the IRS seizes property that doesn’t belong to you (the taxpayer). An erroneous levy means the IRS seized your property but violated a procedural rule, such as levying on exempt property or failing to send proper notice.

To file a claim, contact the IRS with proof supporting your case (e.g., proof of ownership for a wrongful levy, evidence of procedural error for an erroneous levy). Be mindful of strict deadlines. Even if funds are returned, the underlying tax debt remains. A special rule allows you to redeposit returned funds into a retirement account without affecting contribution limits.

After the Request: Navigating Denials and Appeals

If the IRS denies your IRS tax levy release request, it’s not the end of the road. You have powerful appeal rights designed to give you a fair review by someone not involved in the initial decision.

Appealing a Denied IRS Tax Levy Release

You have several formal avenues to challenge a denial:

• The Collection Appeal Program (CAP): This is a relatively fast and informal way to appeal many collection actions, including a denied levy release.
• The Collection Due Process (CDP) Hearing: This is your most powerful option. Your Final Notice of Intent to Levy gives you the right to request a CDP hearing within 30 days. In this formal hearing, you can challenge the levy and propose collection alternatives. To request one, you must file Form 12153 on time.
• Equivalent Hearing: If you miss the 30-day CDP deadline, you may still request an Equivalent Hearing. The process is similar, but you cannot appeal the decision to the U.S. Tax Court.

During an appeal, you’ll work with an IRS settlement officer trained to review cases independently and negotiate solutions. For more details, see the IRS’s Publication 1660 for a full explanation of your appeal rights and our guide on Challenging IRS Collection Action via the Collection Due Process Appeal.

The Role of the Taxpayer Advocate Service (TAS)

If you’re stuck in the IRS bureaucracy or facing immediate, severe financial hardship, the Taxpayer Advocate Service (TAS) can be a crucial ally. TAS is an independent organization within the IRS that helps taxpayers for free.

Contact TAS if an IRS action is preventing you from meeting basic living expenses (food, shelter, medical care) and you can’t resolve it through normal channels. They can also help if you’ve hit a dead end with the IRS or face a systemic problem. TAS has the authority to issue a Taxpayer Assistance Order, which can force the IRS to stop collection actions while your case is reviewed. You can find your local advocate on the TAS website or by calling 877-777-4778. For more on appeals, visit our page on More info about IRS Appeals.

Frequently Asked Questions about IRS Levy Release

Here are answers to common questions about IRS levies.

What is the difference between an IRS levy and a tax lien?

Many taxpayers confuse these. A tax lien is a legal claim the IRS files against your property, securing its interest in your assets. It’s a public notice, not a seizure. An IRS levy is the actual seizure of your property to satisfy the tax debt. A tax lien establishes the government’s right; a levy exercises that right.

Does releasing a levy mean my tax debt is gone?

No. This is a critical misunderstanding. An IRS tax levy release stops the immediate seizure of your assets, but the underlying tax debt, plus penalties and interest, remains. You must still resolve the debt by paying it in full, setting up an installment agreement, or qualifying for another resolution. Failing to do so will likely lead to future collection actions.

How quickly can the IRS release a levy?

The speed of a release varies. If a wage levy causes immediate economic hardship, the IRS must release it promptly once confirmed. For other situations, it can take a few days to a few weeks. The 21-day hold on bank levies provides a critical window to act before the funds are gone. To expedite the process, have all your financial information and your bank or employer’s fax number ready when you call the IRS. This helps them issue the release form (Form 668-D or 668-E) faster.

Don’t Face the IRS Alone: Get Your Levy Released

An IRS levy is stressful, but you have rights and options. Stopping a levy is possible by understanding the pathways to an IRS tax levy release, whether through demonstrating economic hardship, negotiating a payment plan, or filing an appeal. A release provides immediate relief and the chance to resolve your tax debt responsibly.

You don’t have to steer the complexities of IRS collection actions alone. For expert guidance and dedicated advocacy in securing an IRS tax levy release, contact the experienced team at Segal, Cohen & Landis. We are here to help you regain control of your financial life.

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