How a bank levy works
When the bank receives an IRS levy, it generally freezes the funds in the account up to the amount owed, as of that moment. Unlike a wage levy, a bank levy is usually a single seizure, so money deposited afterward is not captured unless the IRS sends another levy. The bank typically holds the frozen funds for a set period before sending them to the IRS, and that hold exists so that errors can be corrected and arrangements made. Joint accounts raise their own questions when the co-owner does not owe the tax. Banks often charge a processing fee and cannot release the money on their own.
Use the hold period
During the hold, the IRS can release all or part of the levy in several situations, including economic hardship and a newly agreed payment arrangement. Reaching the IRS quickly matters, and a call made with current financial information in hand is far more useful than one made without it. Gather the levy notice from the bank, any final notice of intent to levy you received earlier, recent statements for the frozen account, and proof of what the money was earmarked for, such as rent or payroll. If the account belongs to a business with employees, payroll timing needs immediate attention. Do not move money between accounts in ways that look like hiding assets; ask first.
Questions we sort out first
We start by confirming that the levy matches tax periods that are actually assessed and that the earlier notices were properly sent. Then we look at whether a release can be requested before the funds are sent and which arrangement is realistic for the remaining balance. If a co-owner's money was frozen, there are separate procedures for a person who is not the taxpayer. We also check whether New York State is collecting at the same time, since a state bank levy follows its own rules. You leave with a plan for the frozen account and for the debt behind it.
